HD 

a/*+       OUTLINES  OF 
AGRICULTURAL  ECONOMICS 

A  CLASS-BOOK  OF  QUESTIONS 
AND  PROBLEMS 


NOURSE 


yC-NRLF 


THE  UNIVERSITY  OF  CHICAv  1ESS 


JUU& 


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: 


MATERIALS  FOR  THE  STUDY 
OF  ECONOMICS 


N  L1BRARY-AOWICULTURC  DEPT 


OUTLINES  OF  AGRICULTURAL. 
ECONOMICS 


THE  UNIVERSITY  OF  CHICAGO  PRESS 
CHICAGO,  ILLINOIS 


THE  BAKER  AND  TAYLOR  COMPANY 

NEW  YORK 

THE  CAMBRIDGE  UNIVERSITY  PRESS 

LONDON 

THE  MARUZEN-KABUSHIKI-KAISHA 

TOKYO,  OSAKA,    KYOTO,    FUKUOKA,   SKNDAI 

THE  MISSION  BOOK  COMPANY 

SHANflHAI 


OUTLINES  OF 
AGRICULTURAL  ECONOMICS 


A  CLASS-BOOK  OF  QUESTIONS 
AND  PROBLEMS 


By 


EDWIN  G.  NOURSE 

tural  Economic*. 
Ames.  Ioiva 


If 

Professor  of  Agricultural  Economics,  Ioiva  State  College 


THE  UNIVERSITY  OF  CHICAGO  PRESS 
CHICAGO,  ILLINOIS 


Copyright  191 7  By 
The  University  of  Chicago 


All  Rights  Reserved 


Published  September  191 7 
Second  Impression  January  1922 


Composed  and  Printed  By 

The  University  of  Chicago  Press 

Chicago,  Illinois,  U.S.A. 


PREFACE 

This  little  book  appears  in  fulfilment  of  the  promise  made  a  year 
ago  that  there  would  be  a  class-book  to  accompany  Agricultural 
Economics.  In  fact,  these  questions  and  exercises  should  be  regarded 
as  an  integral  part  of  the  earlier  volume  for  all  purposes  of  teaching 
and  study.  They  should  be  bound  together  except  for  the  undue 
size  which  would  result  and  the  possibility  that  some  instructors 
might  desire  to  use  this  class-book  in  connection  with  other  materials. 
For  this  latter  reason  the  writer  has  aimed  to  make  the  questions 
sufficiently  general  in  character  to  be  of  value  to  classes  using  other 
textbooks  than  his  own  and  especially  to  instructors  or  classes  in 
marketing,  rural  credits,  and  similar  special  topics.  While  the  ques- 
tions bear  in  the  main  upon  the  particular  matter  presented  in  the 
companion  volume,  specific  references  have  been  avoided  in  nearly 
all  cases. 

The  writer  disclaims  any  pretense  of  offering  a  bibliography  of 
agricultural  economics.  The  lists  of  "additional  references"  appended 
to  the  various  chapters  are  merely  what  their  name  implies — references 
added  to  those  already  suggested  in  the  footnotes  of  the  various 
selections.  Some  of  these  represent  valuable  material  which  has 
appeared  since  the  publication  of  the  earlier  volume;  others  are  works 
which  for  one  reason  or  another  were  not  used  in  the  compilation  of 
the  source  book,  but  which  seem  to  the  writer  to  be  of  value  for  further 
reading  on  special  topics  or  in  the  preparation  of  term  papers. 

Likewise,  the  lists  of  special  topics  do  not  aim  at  completeness, 
but  are  intended,  by  a  few  concrete  suggestions,  to  stimulate  the 
student  to  discover  suitable  subjects  of  his  own. 

Besides  the  use  which  the  writer  has  already  made  of  this  material, 
a  part  of  the  questions  have  been  used  at  the  University  of  Illinois  by 
Dr.  Charles  L.  Stewart,  from  whom  numerous  helpful  suggestions  have 
been  received.  Criticisms  and  suggestions  from  all  who  may  use  the 
book  are  cordially  invited,  in  order  that  the  book  may  be  revised,  at 
no  distant  date,  in  the  light  of  a  broader  classroom  experience. 

E.  G.  N. 

Fayetteville,  Arkansas 
July  2,  1917 


504 i as 


CONTENTS 

PAGE 

Introduction i 

I.  The  Emergence  of  the  Problem  of  Agricultural  Eco-  ^ 

nomics 3 

II.  Consumption 7 

III.  Land   and    Other   Natural   Agents    of   Agricultural 

Production    . 10 

IV.  Human  Effort  as  a  Factor  in  Agricultural  Production.  16 

V.  Capital- Goods  as  a  Factor  in  Agricultural  Production.  20 

VI.  Organization  and   Management  of  the  Agricultural 

Enterprise .  24 

VII.  Records  and  Accounts  as  Measures  of  Efficient  Manage- 
ment   29 

VIII.  Principles  of  Value  and  Price  as  Related  to  Farm 

Products 32 

IX.  Market  Methods  and  Problems 42 

X.  Transportation  and  Storage  Facilities  as  Factors  in  the 

Marketing  of  Farm  Products 51 

XL  The  Rent  and  Value  of  Farm  Land    .......  58 

XII.  Land  Tenure  and  Land  Policy       ........  64 

XIII.  Interest  on  Farm  Loans 70 

XIV.  Rural  Credits 75 

XV.  Agricultural  Wages 82 

XVI.  Some  Problems  of  Agricultural  Labor 87 

XVII.  Profits  in  Agriculture 91 

Syllabus 94 


INTRODUCTION 

Note. — Unless  the  individual  instructor  suggests  a  different  line 
of  procedure,  the  student  should  pursue  a  systematic  plan  of  study- 
like  the  following:  First,  read  the  introduction  of  the  chapter  to  be 
studied.  Many  points  in  the  discussion  will  probably  not  be  clear 
in  this  preliminary  reading,  but  the  student  will  get  a  certain  per- 
spective for  the  whole  chapter,  which  it  is  desirable  to  have  before 
undertaking  the  study  of  separate  selections.  In  some  cases  it  will 
doubtless  be  helpful  to  interrupt  the  reading  of  the  chapter  introduc- 
tion long  enough  to  turn  over  into  the  body  of  the  chapter  and  read 
some  selection  or  portion  of  a  selection  to  which  specific  reference  is 
being  made.  v 

The  second  step  should  consist  in  reading  the  chapter  section  by 
section,  studying  each  in  the  light  of  the  questions  presented  in  the 
corresponding  section  of  this  question-book  and  of  the  suggestions 
contained  in  the  chapter  introduction. 

Finally,  these  separate  lines  of  thought  should  be  drawn  together 
into  a  somewhat  integrated  discussion  of  the  whole  situation  or  prob- 
lem of  which  they  are  the  component  parts.  For  this  purpose  there 
is  appended  to  each  chapter  in  the  class-book  a  section  labeled 
" Problems."  Many  of  these  consist  of  quoted  opinions  which  are 
submitted  for  the  student's  criticism.  They  are  intended  to  show  the 
practical  guise  in  which  he  will  later  meet  the  problems  of  agricultural 
economics  and  to  test  his  understanding  of  the  principles  which 
should  aid  him  in  solving  them.  At  this  stage  of  his  study  a  re-reading 
of  the  chapter  introduction  is  advised. 


QUESTIONS 

i.  Look  up  several  definitions  of  economics  as  contained  in  stand- 
ard college  texts  in  general  economics.  Can  you,  by  the  change  of 
a  few  words,  make  one  of  them  over  into  a  satisfactory  definition  of 
agricultural  economics  ? 

2.  Would  it  be  sufficient  to  say  that  agricultural  economics  is  a 
study  of  the  price  relationships  of  the  farmer  ?  What  would  be  the 
object  of  such  a  study  of  price  relationships  ? 

3.  Does  the  study  of  agricultural  chemistry,  physics,  or  biology 
give  the  scientifically  trained  farmer  power  to  control  natural  forces 
and  direct  them  to  his  own  advantage  ? 

4.  Does  the  commercial  experience  of  the  last  few  decades  seem 
to  indicate  that  it  is  possible  to  identify  and  understand  economic 


2  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

forces  so  that  we  can  rationally  work  with  them  and  turn  them  to  our 
personal  or  social  gain  ? 

5.  A  prominent  banker  has  said  that  we  are  a  nation  of  economic 
illiterates  and  that  no  other  form  of  illiteracy  is  so  dangerous  in  a 
republic.  Can  you  show  the  truth  of  this  statement  as  applied  to  a 
lack  of  economic  intelligence  among  farmers  ? 

6.  Does  economic  well-being  have  any  bearing  upon  political, 
social,  and  moral  conditions  in  a  community  or  nation  ? 


I.    THE  EMERGENCE  OF  THE  PROBLEM  OF  AGRICUL- 
TURAL ECONOMICS 

QUESTIONS 

i.  Was  the  purpose  of  primitive  man  in  domesticating  plants  or 
animals  the  securing  of  an  economic  gain  ? 

2.  Did  he  make  his  choice  of  species  or  individuals  in  accordance 
with  considerations  of  maximum  return  from  the  minimum  outlay? 
Was  the  savage  greatly  concerned  about  saving  time  ?  Why  ?  Ma- 
terials ?    Why  ? 

3.  Does  it  appear  that  in  his  choices  the  primitive  man  made 
serious  blunders  ?  Are  we  still  undertaking  the  domestication  of  wild 
plants  and  animals  ?    Why  ? 

4.  Were  there  economic  reasons  for  the  appearance  of  pastoral 
peoples?  Did  the  pursuit  of  stock-raising  necessitate  that  the  per- 
sons so  engaged  be  nomads  ? 

5.  Did  pastoral  life  permit  a  raising  of  the  standard  of  living  above 
that  of  hunting  peoples?  Did  it  lead  men  naturally  into  a  more 
advanced  type  of  economic  effort  ?    Explain. 

6.  Did  commerce  grow  up  among  pastoral  peoples?  If  so,  was 
it  concerned  with  trade  in  agricultural  or  non-agricultural  products  ? 

7.  Did  the  growth  of  commerce  tend  to  change  the  character  or 
direction  of  agricultural  efforts  ? 

8.  Can  you  assign  any  reason  why  the  patriarchal  system  should 
be  found  in  conjunction  with  pastoral  farming  ? 

9.  Did  the  pastoral  farmer  get  a  cash  return  from  his  industry  ? 
In  what  form  did  his  return  come  ? 

10.  Did  he  have  " expenses  of  production "  in  the  modern  sense? 
What  determined  his  acreage,  labor  force,  and  amount  of  accumulated 
property  ? 

11.  Did  the  classic  nations  conduct  agriculture  alone  or  as  one  of 
a  group  of  related  industries  ?     What  others  had  they  developed  ? 

12.  Did  the  Roman  farmer  grasp  the  economic  facts  of  his  busi- 
ness? Illustrate,  pointing  out  both  where  he  did  and  where  he 
did  not. 

13.  Was  the  organization  of  agriculture  in  feudal  times  more  or 
less  along  business  lines  than  was  that  of  Rome  ?  than  that  of  early 
pastoral  peoples?  What  do  you  mean  by  the  expression  "organized 
along  business  lines"  ? 

14.  Who  owned  the  land  which  was  used  for  agricultural  purposes 
under  the  feudal  regime  ?  Was  control  of  land  based  upon  absolute 
private  ownership  ? 


4  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

15.  What  is  meant  by  the  " engrossing' '  of  land?  by  ''primogeni- 
ture"? 

16.  Did  the  conditions  of  feudal  tenure  lead  to  a  management  of 
the  soil  which  served  the  best  interests  of  agriculture  ? 

17.  Was  economic  betterment  the  principal  concern  of  the  feudal 
lord  ?  Was  any  surplus  which  might  be  produced  above  the  imme- 
diate needs  of  himself  and  his  dependents  saved  and  devoted  to 
improving  the  productive  equipment  of  the  estate  ? 

18.  Was  labor  employed  effectively  under  the  manorial  system? 

19.  Contrast  the  personal  rights  of  the  feudal  slave,  the  villein, 
and  the  metayer;  their  property  rights. 

20.  Was  any  inducement  to  agricultural  improvement  offered  to 
the  rank  and  file  of  agricultural  workers?. any  inducements  to  the 
accumulation  of  capital  ? 

21.  Was  manorial  economy  concerned  with  market  prices  and 
cash  transactions?  Upon  what  did  their  prosperity  or  unprosperity 
depend  ? 

22.  What  is  meant  by  the  "self-sufficiency "  of  the  manor  ?  Was 
it  a  self-contained  e/ficiency  ? 

23.  What  is  meant  by  the  "commutation  of  labor  dues  for 
money"  ?  Did  it  play  any  part  in  the  improvement  of  agricultural 
conditions  toward  the  close  of  the  mediaeval  period  ? 

24.  Can  you  show  any  connection  between  "enclosure"  and  the 
improvement  of  English  agriculture  ?  Are  enclosures  still  taking  place 
in  England  ? 

25.  Mention  a  few  of  the  technical  improvements  which  charac- 
terized the  Agrarian  Revolution. 

26.  What  bearing  did  the  growth  of  commerce  during  the  six- 
teenth, seventeenth,  and  eighteenth  centuries  have  upon  changes 
which  took  place  in  agriculture  ? 

27.  In  America  did  the  colonists  inaugurate  a  new  type  of  farm- 
ing, adopt  or  adapt  that  of  the  natives,  or  transplant  European 
farming  to  this  country  ? 

28.  What  circumstances  forced  some  modification  of  old  prac- 
tices ?  Have  such  conditions  affected  American  agriculture  since  the 
colonial  period  ?     Do  they  still  operate  ? 

29.  In  reviving  primitive  methods  were  the  pioneers  economically 
justified  ?  Can  you  suggest  any  primitive  practice  which  is  still  per- 
sisted in  though  no  longer  justifiable  upon  economic  grounds  ? 

30.  Were  the  reasons  which  caused  American  pioneer  farms  to  be 
self-sufficient  the  same  as  those  which  brought  about  that  condition 
upon  the  English  manor?     Show  both  likenesses  and  differences. 

31.  Trace  several  steps  in  the  break-up  of  that  self-sufficiency. 

32.  What  is  meant  by  "commercialized  farming"? 


PROBLEM  OF  AGRICULTURAL  ECONOMICS  5 

33.  Show  how  commercial  agriculture  leads  to  better  utilization 
of  natural  resources.  May  it  lead  to  poorer  utilization?  Did  you 
ever  see  a  cotton  farm  without  a  vegetable  garden  or  a  wheat  farm 
without  any  fruit  trees  ? 

34.  Show  the  difference  between  individual  self-sufficiency  and 
national  self-sufficiency  in  agriculture.  Is  the  latter  desirable? 
Why? 

35.  Does  commercial  farming  lead  to  one-crop  agriculture? 
Inevitably  ? 

36.  Does  the  specialty  farmer  secure  greater  efficiency  from  labor  ? 
from  equipment  ?     Sometimes  or  always  ? 

37.  What  is  meant  by  "the  business  of  farming''  ?  What  special 
knowledge  or  training  does  it  call  for  ? 

PROBLEMS 

1.  "With  the  development  of  chemistry,  bacteriology,  and  other 
physical  and  biological  sciences,  the  economic  aspects  of  the  produc- 
tion side  of  agriculture  were  left  to  the  farmer  unaided.  This  resulted 
in  a  one-sided  development  of  our  agricultural  education,  which 
accounts  for  the  fact  that  the  wise  farmer  mistrusts  many  of  the 
statements  handed  him  by  the  colleges  and  experiment  stations." 
Take  several  figures  of  loss  due  to  insect  pests  or  the  escape  of  elements 
of  plant  food,  such  as  are  given  out  by  entomologists  and  chemists, 
and  illustrate  the  foregoing  quotation.  Show  the  relation  of  the 
economic  to  the  technical  problem  in  agriculture. 

2.  "The  modern  farmer,  besides  being  something  of  a  scientist, 
must  be  a  good  general,  a  more  than  good  financier,  a  good  executive, 
a  man  of  courage  and  vision."  Show  how  these  qualities  are  related 
to,  or  grow  out  of,  the  economic  problem  of  agriculture. 

3.  "The  farmer  used  to  be  the  most  independent  man  on  earth, 
and  therefore  the  happiest.  But  now  he  is  falling  a  prey  to  the  rail- 
road and  the  capitalist,  and  the  trader  and  the  labor  organizer.  His 
days  of  peace  and  prosperity  are  over."  Is  it  true  that  the  farmer 
must  contend  with  these  and  other  outside  forces  today  ?  Is  it  true 
that  they  have  wrecked  his  peace  and  prosperity  ?  May  he  be  bene- 
fited by  them  if  he  has  the  knowledge  of  how  to  work  with  them? 
Explain. 

ADDITIONAL  REFERENCES 

Thomas,  A  Source  Book  of  Social  Origins. 
Forrest,  The  Development  of  Western  Civilization. 

Bogart  and  Thompson,  Readings  in  the  Economic  History  of  the  United 
States. 


6  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

Robinson,  An  Economic  History  of  Agriculture  in  Minnesota. 

Bidwell,  Rural  New  England  at  the  Beginning  of  the  Nineteenth  Century. 

Cyclopedia  of  American  Agriculture,  Vol.  IV. 

TOPICS  FOR  SPECIAL  PAPERS 

The  Survival  of  Status  in  Rural  Relations. 
The  Commercializing  of  American  Agriculture. 
Agricultural  Economist  v.  Agricultural  Scientist. 
The  Place  of  Economics  in  Agricultural  Education. 


II.    CONSUMPTION 

QUESTIONS 

i.  Is  there  any  logical  reason  for  placing  the  discussion  of  con- 
sumption first  in  our  study  of  the  divisions  of  economics?  What 
relation  does  it  bear  to  the  subject  of  production  ? 

2.  Some  writers  have  put  this  division  last.  What  reasons  could 
be  advanced  for  doing  so  ? 

3.  Does  the  character  of  our  consumption  rest  upon  physiological, 
psychological,  or  social  considerations  ?    Are  these  mutually  exclusive  ? 

4.  Is  the  aim  of  our  consumption  to  secure  maximum  enjoyment, 
personal  well-being,  or  social  welfare  ? 

5.  To  what  may  we  look  for  guidance  in  these  endeavors?  Is 
the  problem  purely  one  of  economics  ? 

6.  What  is  the  law  of  diminishing  utility?  What  qualifications 
must  be  emphasized  in  stating  it  ?  Does  its  general  principle  seem 
valid  in  your  own  case  ? 

7.  Show  how  the  law  of  variety  operates  in  your  personal  satis- 
faction of  desires.  Could  you  formulate  a  rule  to  cover  the  method 
by  which  one  could  secure  the  maximum  return  from  each  dollar 
spent  for  consumption  goods  ? 

8.  Could  such  a  rule  be  called  rational  consumption  or  an  "eco- 
nomic order  of  consumption"?  Do  some  persons  govern  their  con- 
sumption after  such  a  plan  ?     Do  many  ?     Why  ? 

9.  Might  such  a  plan  be  carried  out  by  each  individual  without 
producing  the  most  advantageous  results  for  society  as  a  whole? 
How? 

10.  Explain  the  "law  of  least  social  cost."  Is  it  particularly  sig- 
nificant in  connection  with  agriculture  ?     Why  ? 

.  n.  Does  the  fact  that  human  wants  expand  beyond  existing 
means  of  satisfying  them  have  favorable  consequences?  Does  it 
lead  to  progress  ?    How  ?    Necessarily  ? 

12.  What  is  meant  by  the  "dynamics  of  wealth"?  Can  you 
show  its  relation  to  the  standard  of  living  ? 

13.  Have  Americans  prided  themselves  upon  having  a  high  stand- 
ard of  living?  In  what  sense  has  it  been  "high"?  What  results 
have  followed? 

14.  Does  the  character  of  agriculture  reflect  the  character  of 
public  consumption? 

15.  Does  such  response  to  consumers'  demands  sometimes  bring 
unfortunate  consequences?  Do  these  ills  fall  upon  the  agricultural 
industry  or  upon  society  as  a  whole  ? 


8  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

1 6.  Are  such  results  checked  automatically  ?  How  ?  Promptly  ? 
Before  harm  is  done  ? 

17.  Is  the  relation  of  the  farmer  to  all  this  entirely  passive  or  can 
he  shape  the  conditions  to  his  liking  ?     Explain. 

18.  Does  advertising  alter  the  amount  of  food  or  other  farm 
products  consumed?  Does  it  shift  the  consumption  from  certain 
articles  to  certain  others  ? 

19.  Point  out  the  danger  of  overestimating  the  possibility  of  per- 
suading the  public  to  consume  according  to  the  farmer's  needs  of  a 
market. 

20.  What  appears  to  be  the  farmer's  positon  with  reference  to 
his  own  consumption  standards?  How  have  they  come  to  be  as 
they  are  ?    Are  they  changing  ?    For  better  or  worse  ? 

21.  Can  you  point  out  defects  in  rural  standards  of  consumption 
which  appear  to  be  due  to  lack  of  proper  understanding  of  the  prob- 
lem, e.g.,  lack  of  knowledge  of  sanitary  or  dietary  requirements? 
other  causes  ? 

22.  How  can  each  of  them  be  remedied? 

23.  Point  out  some  important  merits  of  rural  standards  of  con- 
sumption. 

24.  What  is  the  meaning  of  an  efficient  standard  of  living  ? 

25.  Is  the  average  American  farmer's  standard  low?  Inefficient? 

26.  Does  immigration  tend  to  modify  rural  standards  of  con- 
sumption ?    How  ? 

27.  Is  a  rise  in  the  price  of  farm  products  reflected  in  the  farmer's 
standard  of  living  ?    How  ? 

PROBLEMS 

1.  Look  up  Engel's  Law  (in  Ely's  Outline  of  Economics  or  else- 
where). Do  you  believe  that  the  proportions  which  Engel  found 
between  the  various  classes  of  expenditures  would  hold  for  American 
rural  families?  How  and  why  are  they  modified?  Is  this  change 
for  better  or  for  worse  ?     (See  also  selection  28  in  this  connection.) 

2.  "It's  not  much  use  to  grow  better  corn  and  live  stock  and  get 
more  money  if  we  can't  use  that  money  to  make  better  homes.  And 
how  are  we  going  to  have  better  homes  if  we  don't  train  the  girls  for 
it?"  Is  this  the  central  need  in  rural  consumption  today?  Are 
there  other  ways  of  bringing  about  desirable  consumption  standards  ? 
What  is  being  done  along  any  of  these  lines  ? 

3.  "A  few  make  so  much  money  that  they  can  slight  the  art  of 
spending  without  suffering  discomfort,  but  the  vast  majority  would 
gain  as  much  from  wiser  spending  as  from  increased  earnings.  Com- 
mon sense  forbids  us  to  waste  dollars  earned  by  irksome  effort,  and 
yet  we  have  developed  less  skill  in  the  art  of  spending  than  of  making 
money.     Ignorance  of  qualities,  uncertainty  of  taste,  lack  of  account- 


CONSUMPTION  9 

ing,  carelessness  about  prices— faults  which  would  ruin  a  mer- 
chant— prevail  in  our  housekeeping."  Can  you  explain  why  it  is 
that  such  a  condition  has  come  about  ?  Does  the  rural  situation  in 
this  regard  show  peculiarities  of  its  own  ?  How  can  the  situation  be 
remedied  ? 

4.  "Formerly  the  family  was  the  unit  in  large  measure  for  pur- 
poses, both  of  producing  and  consuming  goods.  Production  has  been 
organized  on  the  basis  of  a  new  unit — the  business  enterprise — and  the 
new  unit  proved  vastly  more  efficient  than  the  old.  But  as  a  unit 
for  consuming  goods,  for  spending  money,  the  family  has  remained 
substantially  where  it  was  in  colonial  days.  We  have  not  developed 
a  large,  more  efficient  unit  for  spending  money."  Is  the  rural  family 
even  more  closely  attached  to  the  family  system  than  the  town 
family?  How  might  efficiency  in  buying  be  brought  to  the  rural 
family  ?  Does  domestic-science  training  operate  in  this  direction  ? 
Does  co-operative  organization  ? 

5.  "The  trouble  with  the  farmers  of  this  country  is  that  they 
haven't  got  hold  of  the  tremendous  power  of  advertising.  They  com- 
plain of  the  railroads  and  the  middleman,  but  what  they  need  to  do 
to  move  their  product  out  at  good  prices  is  to  get  hold  of  the  con- 
sumer through  clever  advertising.  You  can  sell  anything  if  you  adver- 
tise it  properly."  Does  such  a  statement  apply  without  limitation? 
Was  the  writer  probably  thinking  of  wheat  and  cotton  ?  Of  what 
classes  of  goods?  Point  out  the  precise  results  which  advertising 
does  bring  about. 

ADDITIONAL  REFERENCES 

Mitchell,  "The  Backward  Art  of  Spending  Money,"  American  Economic 
Review,  II,  269. 

Cherington,  "The  Ability  of  the  Consumer  to  Defend  Himself,"  in 
Materials  for  the  Study  of  Elementary  Economics,  p.  374. 

Langworthy, "  Eggs  and  Their  Value  as  Food,"  Bulletin  471,  U.S.  Department 
of  Agriculture. 

,  "Potatoes,  Sweet  Potatoes,  and  Other  Starchy  Roots  as  Food," 

Bulletin  468,  U.S.  Department  of  Agriculture. 

Holmes  and  Lang,  "Fats  and  Their  Economical  Use  in  the  Home,"  Bulletin 
46 q,  U.S.  Department  of  Agriculture. 

Atwater,  "Food  Values  and  Uses  of  Poultry,"  Bulletin  467,  U.S.  Depart- 
ment of  Agriculture. 

TOPICS  FOR  SPECIAL  PAPERS 

Independent  Standards  of  Consumption  for  the  Rural  Community. 
Learning  How  to  Spend  Wisely. 
Educating  the  Consumer  of  Farm  Products. 

A  Criticism  of  Domestic  Expenditures  in . 

An  Efficient  Standard  of  Living  for  the  Farmer. 


III.  LAND  AND  OTHER  NATURAL  AGENTS  OF  AGRI- 
CULTURAL PRODUCTION 

QUESTIONS 

i.  Might  we  state  the  process  of  agricultural  production  in  the 
form  of  an  equation,  as  follows: 

L+W+C=P, 

in  which  L  stands  for  land  and  other  agents  of  nature,  W  for  work  or 
labor,  C  for  the  capital-goods  employed,  and  P  for  the  product 
secured  ? 

2.  To  give  such  an  equation  any  degree  of  mathematical  accuracy, 
each  term  should  have  an  exponent,  should  it  not,  in  order  to  show 
how  much  of  each  factor  is  taken,  as  6  units  of  work  equipped  with 
3  units  of  capital  goods  and  employed  with  io  units  of  land  produce 
15  units  of  product? 

ioL+6W+3C=i5P. 

3.  But,  if  the  exponent  gives  expression  to  the  quantitative  value 
of  the  given  factor,  do  we  not  still  require  a  coefficient  to  give  expres- 
sion to  its  qualitative  value?  Is  the  factor  L  " raised  to  a  higher 
power"  by  certain  favoring  conditions  of  climate,  fertility,  and 
topography  which  should  be  expressed  as  coefficients  of  the  factor 
when  we  are  making  up  our  equation  of  production  ?  (For  a  fourth 
factor  of  production,  see  chapter  vi.)  • 

4.  Show  how  extreme  heat  and  extreme  cold  place  limitations 
upon  the  productive  power  of  land  and  how  men  have  so  adapted 
their  agricultural  operations  to  these  conditions  as  to  push  their 
economic  efforts  up  as  close  as  possible  to  the  line  of  absolute  physical 
unproductiveness. 

5.  Is  a  region  which  is  too  cold  or  too  hot  for  raising  a  particular 
product  yet  capable  of  yielding  a  product  of  some  other  kind  ?  Is 
this  substitute  product  likely  to  have  as  great  economic  value  as  those 
of  less  extreme  climates  ?  greater  value  ?    Illustrate. 

6.  May  a  region  which  does  not  yield  certain  products  with 
conventional  methods  of  growing  be  made  productive  by  a  modifica- 
tion of  that  method?     Illustrate. 

7.  Can  man  alter  the  climate  of  a  region  to  permit  the  growing 
of  a  crop  not  naturally  suited  to  the  temperature  conditions  ?  Are 
all  the  lands  now  producing  citrus  fruits,  peaches,  and  other  delicate 
products  naturally  safe  for  such  vegetation  ? 


LAND  AND  OTHER  NATURAL  AGENTS       n 

8.  What  is  meant  by  a  " marginal"  climate  ?  What  factors  enter 
into  the  establishment  of  the  margin  of  cultivation  ?  Is  its  location 
to  be  regarded  as  permanent  ?     Why  ? 

9.  Does  rainfall  impose  a  more  or  a  less  rigid  limitation  than  does 
temperature  upon  the  productivity  of  land  ?     Explain. 

10.  Show  how  moisture  is  a  limiting  factor  even  in  so-called 
humid  regions.  Is  there  also  a  surplus  of  moisture  in  the  same 
regions  ?     At  the  same  time  ? 

n.  Give  a  brief  discussion  of  the  methods  of  dry  farming.  Are 
similar  methods  applicable  during  droughts  in  sections  ordinarily 
sufficiently  watered  ?  Which  would  bring  the  larger  returns,  taking 
more  dry  land  into  cultivation  or  handling  the  old  lands  better  during 
dry  periods  ?     Which  is  more  difficult  to  achieve  ? 

12.  Show  the  nature  of  the  economic  problem  resulting  from  the 
presence  of  irrigable  lands,  sub-humid  lands,  lands  subject  to  drought, 
lands  occasionally  overflowed  or  waterlogged,  small  and  scattered  bits 
of  swamp,  and  large  tracts  permanently  too  wet  for  cultivation. 
Where  can  we  best  push  out  the  margin  of  production  ? 

13.  Explain  how  judicious  and  scientific  selection  and  breeding 
of  plants  may  enable  us  to  use  more  lands  in  their  natural  state.  Is 
this  cheaper  than  trying  to  change  the  character  of  the  land  ?  How 
about  the  value  of  the  product  ? 

14.  What  proportion  of  the  area  of  the  United  States  is  now  cul- 
tivated ?  Is  any  part  of  our  area  unavailable  because  of  temperature 
conditions  ?  How  much  may  be  added  by  reclamation  of  lands  too 
wet  or  too  dry  at  the  present  time  ?  Why  have  we  not  already  done 
this  ?     When  shall  we  do  it  ?' 

15.  What  are  the  chemical  elements  which  are  the  limiting  factors 
in  most  agricultural  soils  ?  Is  it  economically  practicable  to  main- 
tain this  source  of  productivity  through  an  indefinite  period  of  agri- 
cultural use  of  land  ?     Explain. 

16.  Which  physical  factors  in  productivity  are  inherent  in  a  soil 
and  which  are  the  result  of  tillage  methods?  Show  the  economic 
aspect  of  these  facts.  May  intelligent  farming  secure  a  virtual 
increase  in  our  land  resources  at  no  expense  ? 

17.  Does  the  present  trend  of  our  biological  studies  seem  to  hold 
out  a  hope  that  in  the  future  we  may  maintain  the  productivity  of  our 
lands  more  completely  and  more  economically  than  in  the  past  ?    How  ? 

18.  Is  agricultural  productivity  an  "  original  and  indestructible 
power  of  the  soil"?  In  your  answer  relate  the  physical  law  01  the 
conservation  of  matter,  the  question  of  biological  condition  and  the 
needs  of  plants,  and  the  economic  issue  involved. 

19.  Point  out  both  the  technical  and  the  economic  sense  in  which 
rough  topography  constitutes  a  brake  upon  the  productivity  of  land. 


12  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

20.  How  may  we  get  the  maximum  performance  from  hilly  lands  ? 
Do  the  same  general  methods  apply  here  as  in  previous  sections,  viz., 
choosing  a  suitable  crop,  adapting  our  agricultural  methods  to  the 
character  of  the  land,  and  actually  remaking  the  land?  What  is 
likely  to  be  the  economic  order  of  their  application  ?  Illustrate  by 
the  experience  of  America,  Italy,  and  China. 

21.  Why  did  population  spread  westward,  as  soon  as  means  of 
transportation  were  made  available,  instead  of  using  the  eastern  sea- 
board more  fully?  Why  not  raise  all  the  perishable  products  for 
New  York  City  in  the  adjoining  counties?  Why  have  American 
farmers  gone  to  Western  Canada  ? 

22.  State  the  law  of  diminishing  returns  from  land.  Is  it  a  part 
of  the  working  knowledge  of  the  successful  farmer?  How  does  he 
phrase  it?  Do  some  farmers  ignore  the  principle?  Entirely?  In 
part? 

23.  Under  what  circumstances  will  later  applications  of  labor  and 
capital  to  land  yield  a  larger  return  than  those  which  have  gone  before  ? 

24.  Does  this  fact  constitute  a  denial  of  the  principle  of  diminish- 
ing returns  ?     State  the  law  in  such  a  form  as  to  cover  such  cases  fully. 

25.  What  is  intensive  cultivation?  the  intensive  margin  of  culti- 
vation ?     Give  local  illustrations. 

26.  What  is  extensive  cultivation  ?  the  extensive  margin  of  culti- 
vation ?     Illustrate. 

27.  Are  these  relative  or  absolute  terms?  When  is  cultivation 
absolutely  extensive? 

28.  Must  all  agriculture  be  somewhat  extensive  ?  somewhat  inten- 
sive ?  Is  the  really  significant  question  whether  a  particular  outlay 
be  made  intensively  or  extensively  ? 

29.  Popular  writers  and  speakers  are  constantly  referring  to 
diminishing  returns  in  agriculture  as  though  it  were  the  same  thing 
as  the  decline  in  the  fertility  of  land.  Show  carefully  that  this  is  not 
the  case.  Again  state  the  law  so  as  to  exclude  the  possibility  of  such 
a  blunder  in  interpreting  it. 

30.  Now  show  the  effect  which  declining  fertility  will  have  upon 
the  operation  of  the  law  of  diminishing  returns  from  land. 

31.  Is  scientific  agriculture  a  means  of  getting  a  reprieve  from  the 
effects  of  the  law  of  diminishing  returns  from  land  ?  Explain  just 
what  is  the  relationship  of  the  two.  Show  that  your  answer  to  this 
question  is  consistent  with  that  of  the  previous  case. 

32.  Does  conservation  mean  saving  from  use?  What  does  it 
mean  ? 

33.  Outline  a  policy  of  conservation  of  farming  land  which  is 
economically  sound  today.  Does  it  take  account  of  the  principle  of 
diminishing  returns  from  land  farmed  intensively  ? 


LAND  AND  OTHER  NATURAL  AGENTS        13 

34.  Whose  interests  should  be  kept  in  mind  in  making  a  conser- 
vation program,  those  of  present  consumers  of  agricultural  products 
or  those  of  the  future  ?  Present  or  future  producers  ?  Can  we  recon- 
cile the  interests  of  all  these  classes  ? 

35.  Were  the  pioneers  who  homes teaded  the  Mississippi  Valley 
conservationists  ?  Were  they  enemies  of  the  people  ?  Was  their 
profit  others'  loss  ?    Whose  ?    Have  they  any  defense  ? 

36.  Can  you  point  out  some  sort  of  exploitative  agriculture  which 
is  economically  justifiable  ?  some  which  is  not  ? 

37.  Is  the  careful  farming  of  rocky  hillsides  (even  conceivably 
increasing  their  fertility)  true  conservation  ?  What  would  be  ? 
Extend  this  to  apply  to  all  the  varieties  of  land  in  the  United  States. 

38.  Is  there  reason  to  suppose  that,  having  taken  the  cheap  road 
to  agricultural  production  in  the  past,  we  shall  find  new  sources  of 
cheap  fertility  in  the  future  ?    Explain  several  prospects. 

39.  Does  it  seem  likely  that  numerous  changes  in  the  arts  will 
in  the  future  tend  to  enlarge  the  agricultural  powers  of  land  ?  Men- 
tion several. 

PROBLEMS 

1.  A  lecturer  said:  "Few  people  realize  that  Australia  contains 
an  area  larger  than  the  United  States.  If  you  do  not  find  suitable 
opportunities  here,  come  out  to  Australia. "  Even  granting  the 
accuracy  of  his  figures,  is  physical  area  of  the  two  countries  a  fair 
basis  of  comparison  of  their  agricultural  resources  in  land  ?  Are  the 
United  States  and  Canada  comparable  in  this  way?  Why?  The 
United  States  and  Mexico  ?    Europe  ? 

2.  "A  fact  which  distinguishes  agriculture  from  all  other  industries 
is  its  dependence  upon  land.  A  manufacturing  or  mercantile  estab- 
lishment can  economize  land  surface  by  building  up  into  the  air;  a 
mine  needs  land  surface  only  as  a  means  of  getting  access  to  the 
mineral  deposit  beneath.  But,  no  matter  how  deep  the  soil  or  how 
rich  the  deposit  of  plant  food  in  a  given  area  may  be,  there  is  a  limit 
to  the  number  of  plants  that  can  grow  on  that  area,  and  therefore 
the  product  of  that  area  does  not  depend  exclusively  upon  the  depth 
and  richness  of  the  deposit;  it  depends  quite  as  much  upon  the  size 
of  the  area."  Is  this  a  peculiarity  of  land  as  a  factor  in  agricultural 
production  ?  Does  the  thinness  of  a  soil  layer  sometimes  become  a 
limiting  factor  ?  Did  you  ever  hear  of  "  two-story  farming"  ?  How 
deep  does  a  deep-tillage  machine  make  the  soil  available  ?  May  we 
go  deeper  in  the  future?  Only  very  little  manufacturing  and  mer- 
cantile business  runs  more  than  ten  stories  high.  Is  it  likely  that 
deep  tillage,  artificial  fertilization,  and  the  like  will  give  us  ten-story 
agriculture  ?    How  high  will  cities  be  then  ? 


14  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

3.  "The  experience  of  Holland  in  draining  Haarlem  Lake  may- 
serve  as  an  example.  This  was  a  body  of  water  covering  42,000 
acres  at  an  average  depth  of  over  13  feet.  Such  an  undertaking  was 
relatively  greater  in  1848  than  it  would  be  now  and  was  all  the  more 
difficult  because  the  bottom  of  the  lake  was  below  sea-level,  and  all 
the  water  had  to  be  lifted  out  of  it."  Just  before  the  outbreak  of  the 
European  war  Holland  was  planning  an  enormous  undertaking  of  this 
sort.  Does  this  point  to  large  possibilities  at  the  mouth  of  the 
Mississippi?  elsewhere?  Is  it  conceivable  that  much  of  the  water 
which  now  comes  down  our  rivers  might  be  impounded  at  flood  time 
and  pumped  back  over  the  land  during  periods  of  scant  rainfall? 
How  would  the  coming  of  cheaper  mechanical  power  affect  this  ? 

4.  "It  is  well  known  that  pioneer  homesteads  were  generally 
located  by  springs ;  that  in  the  course  of  a  decade  or  two  many  of  the 
springs  failed,  and  shallow  wells  were  dug  for  domestic  supply;  and 
that  these  wells  in  turn  frequently  failed  and  were  either  deepened 
or  replaced  by  drilled  wells.  A  careful  investigation  of  conditions  for 
about  twenty  years  back  shows  a  very  general  lowering  of  the  water 
table  throughout  the  older  settled  portions  of  the  Mississippi  Valley — 
3.87  feet  in  Wisconsin,  3.45  in  Minnesota,  1.94  in  Tennessee,  and 
so  on.  For  eight  states  this  seems  to  indicate  an  average  lowering 
equivalent  to  10. 5  feet  in  the  eighty  years  since  permanent  settlement 
and  cultivation  began.  The  water  supply  of  a  country  is  its  agricul- 
tural capital,  and  these  figures  make  clear  the  fact  that  the  reserve 
agricultural  capital  of  the  country  is  shrinking. "  Is  this  the  real 
limiting  factor  in  our  agriculture?  If  so,  what  are  we  going  to  do 
about  it? 

5.  "There  are  in  this  country  a  number  of  important  sources  of 
potash  salts,  and,  owing  to  the  conditions  brought  on  by  the  European 
war,  they  are  in  a  way  to  be  developed  on  a  scale  which  offers  hope 
that  the  American  farmer  may  have  a  home  supply  of  potash  in  the  not 
distant  future."  Explain.  Should  we  include  deposits  of  phosphate, 
potash,  and  other  mineral  fertilizers  as  a  part  of  the  natural  resources 
of  agriculture?  Would  the  discovery  of  a  potash  bed  enlarge  our 
land  resources  as  truly  as  the  discovery  of  an  unknown  island  ? 

6.  "The  farmer  wants  extent  of  land  and  he  wants  his  land  to  be 
fertile,  but  what  is  sometimes  even  more  significant  than  these  quali- 
ties is  the  location  of  the  farm  which  he  is  to  cultivate."  Aside  from 
its  relation  to  climate,  is  location  a  factor  in  the  productivity  of  land  ? 
value  productivity  or  technical  productivity  ?  May  these  economic 
qualities  of  land  which  are  due  to  location  be  changed  with  the  passage 
of  time  ?    Illustrate. 

7.  "The  profitable  limit  to  intensive  cultivation  is  reached  at  the 
point  where  the  return  to  the  last  unit  of  labor  and  the  last  unit  of 


LAND  AND  OTHER  NATURAL  AGENTS        15 

capital  corresponds  to  the  return  to  labor  and  capital  on  land  at  the 
extensive  margin  of  cultivation.' '  Is  this  true?  Work  out  your 
proof  illustrating  with  a  chart. 

ADDITIONAL  REFERENCES 

King,  Farmers  of  Forty  Centuries. 

Carver,  Principles  of  Rural  Economics,  chap.  iii. 

Shaler,  Man  and  the  Earth. 

Kropotkin,  Fields,  Factories,  and  Workshops. 

Teele,  Irrigation  in  the  United  States. 

Crookes,  The  Wheat  Problem. 

Hopkins,  Soil  Fertility  and  Permanent  Agriculture. 

Hill,  Highways  of  Progress. 

McGee,  "Subsoil  Water  of  Central  United  States,"  Yearbook  U.S.  Depart- 
ment of  A  griculture,  1 9 1 1 . 

Brown,  "  Importance  of  Developing  Our  Natural  Resources  of  Potash," 
Yearbook  of  the  U.S.  Department  of  Agriculture,  1916. 

Woods,  "The  Present  Status  of  the  Nitrogen  Problem,"  Yearbook  of  the 
U.S.  Department  of  Agriculture,  1906. 

Hirshberg,  "Making  Foods  of  Chemicals,"  World's  Work,  XXVI,  115. 
(See  also  Scientific  American  Supplement,  LXXIII,  310.) 

Woodward,  "Land  Drainage  by  Means  of  Pumps,"  Bulletin  304,  U.S. 
Department  of  Agriculture. 

TOPICS  FOR  SPECIAL  PAPERS 

How  Science  Discovers  New  Agricultural  Resources. 

Fitting  the  Character  of  Our  Production  to  the  Nature  of  Our  Resources. 

The  Possibilities  of  Irrigation  (or  drainage)  in  the  United  States  (or  some 

particular  state  or  section). 
Getting  the  Full  Value  of  Our  Rainfall. 
How  Fertility  Is  Wasted. 
The  Danger  of  Declining  Fertility. 

Why  We  Need  Not  Fear  Future  Barrenness  of  Our  Fields. 
A  Rational  Conservation  Program  for  Agricultural  Lands. 


IV.    HUMAN  EFFORT  AS  A  FACTOR  IN  AGRICULTURAL 

PRODUCTION 

QUESTIONS 

i.  In  our  equation  of  agricultural  production,  shall  our  labor 
factor  carry  an  exponent  to  indicate  numbers  of  workers  and  a  co- 
efficient to  indicate  their  quality  ? 

2.  What  percentage  of  our  people  make  up  the  agricultural  group  ? 
What  has  been  the  trend  of  this  proportion  since  1820?  Make  a 
chart  to  show  this. 

3.  Why  has  the  rural  birth-rate  fallen  off?  Does  this  constitute 
a  national  danger  ?     Why  ? 

4.  What  is  the  nature  and  meaning  of  the  "rural  exodus"?  Is 
it  greater  or  less  today  than  one  year  ago  ?  Why  ?  Five  years  ago  ? 
Why  ?     Twenty-five  years  ago  ? 

5.  In  the  so-called  rural  exodus  do  certain  classes  leave  the  farm  ? 
Which  classes  ?     What  is  the  ultimate  effect  upon  the  labor  force  ? 

6.  Has  the  back-to-the-land  agitation  actually  reversed  the  tide  ? 
Why  ?  Did  it  introduce  any  new  element  into  our  agricultural  labor 
group  ?     Explain.     Is  this  important  ? 

7.  How  large  a  factor  is  immigration  in  the  determination  of  our 
farm  labor  supply?  Was  it  larger  or  smaller  in  the  past?  Why? 
Was  it  different  in  character  ? 

8.  Were  South  Europeans  agriculturists  in  their  own  countries 
before  coming  here?  Do  they  prove  good  workers  when  they  get 
into  our  farming  communities  ? 

9.  What  are  the  principal  difficulties  in  the  way  of  recruiting  our 
farm  workers  extensively  from  this  source  ? 

10.  What  part  has  the  Asiatic  played  in  the  development  of 
American  agriculture  ? 

n.  What  is  the  present  status  of  the  question  of  Asiatic  labor  on 
American  farms  ?    How  has  it  come  to  this  pass  ? 

12.  How  large  a  place  does  the  negro  fill  in  the  ranks  of  farm  labor  ? 
Does  he  seem  to  hold  his  own  in  his  original  field  ?  Does  he  show  any 
tendency  to  invade  other  areas?  to  be  displaced  by  other  workers 
when  brought  into  direct  competition  ?     Why  ? 

13.  Is  women's  part  in  agricultural  labor  increasing  or  diminish- 
ing ?  Do  you  see  any  possibility  of  a  change  with  the  general  move- 
ment of  women  into  industry  ?  As  farm  managers  ?  in  what  types  of 
farming  ?    As  employees  ?     (See  problem  4.) 

14.  What  sort  of  a  labor  demand  is  made  by  agriculture?  Is 
there  a  demand  for  specialized  ability  and  training  ? 

16 


HUMAN  EFFORT  A  FACTOR  IN  PRODUCTION  17 

15.  How  long  does  it  take  to  make  a  master-farmer?  Explain 
the  process  fully.     Is  it  a  trade,  a  profession,  or  a  job  ? 

16.  How  should  this  labor  group  be  taught  or  trained  in  order 
to  get  the  most  adequate  labor  supply  at  the  minimum  cost  ? 

17.  What  is  the  relation  of  versatility  of  the  laborer  (i.e.,  famili- 
arity with  many  kinds  of  farming)  to  progress  in  farming  methods  ? 
Is  this  an  argument  against  specialized  agriculture  ? 

18.  Explain  the  co-operative  demonstration  work  as  a  method  of 
securing  a  high  quality  of  farm  effort. 

19.  Is  the  negro  a  labor  element  which  is  readily  assimilated  into 
new  methods  of  farming?  Is  he  what  might  be  called  a  " natural" 
farmer  ?  What  does  that  mean  ?  Does  he  use  machinery  effectively  ? 
get  the  scientific  point  of  view  ?    work  hard  ?     steadily  ? 

20.  Show  how  health  conditions  affect  the  quality  of  the  rural 
laborers  ?  How  does  the  negro  stand  in  this  regard  ?  Are  conditions 
of  rural  health  improving  ?    How  ? 

21.  Does  the  farm  worker's  state  of  mind  have  anything  to  do 
with  his  efficiency?  Would  a  feeling  of  security  be  a  help?  self- 
respect?  knowledge  that  increased  efficiency  would  bring  increased 
pay  ?    Point  out  some  others. 

22.  Would  five  members  of  a  given  family  running  their  farm 
enterprise  constitute  a  more  or  less  efficient  labor  group  than  five 
unrelated  persons  of  equal  strength  and  ability?    Why? 

23.  Can  gangs  of  laborers  be  employed  effectively  in  agriculture  ? 
Why  ?  More  effectively  in  some  types  of  agriculture  than  in  others  ? 
Why  ?  Can  gang  work  be  made  the  basis  of  permanent  labor  organi- 
zation in  agriculture  or  used  only  for  seasonal  work?  Explain  the 
economic  importance  of  this  factor. 

24.  Does  tenancy  produce  inefficient  labor?  How?  Might  it 
be  that  the  man  was  a  tenant  because  he  was  inefficient  instead  of  the 
other  order  of  cause  and  effect  ? 

25.  Are  all  farm  owners  efficient  ?  Are  they  likely  to  be  stimulated 
by  the  responsibilities  of  ownership  ?  May  the  tenant  be  responsible 
for  a  larger  business  than  the  owner  ? 

26.  Would  it  be  possible  to  introduce  forms  of  labor  association 
which  would  bring  about  more  effective  labor  conditions?  Can 
agricultural  interests  follow  the  pattern  set  by  other  industries  ? 

27.  During  the  war  some  European  countries  have  provided  that 
farm  labor  must  be  pooled  during  harvest  time,  so  that  as  soon  as  a 
farmer  has  his  own  crop  harvested  he  may  be  assigned  to  help  others 
whose  work  has  not  yet  been  finished.  In  America  some  so-called 
civil-military  plans  of  mobilizing  high-school  boys  and  city  men  to 
work  on  farms  during  their  respective  rush  seasons  have  been  advo- 
cated.    Which  of  these  plans  appears  to  you  to  be  the  more  feasible  ? 


1 8  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

Does  the  type  of  farming  affect  the  availability  of  either  of  these 
methods  of  organizing  labor  ?  Do  they  offer  valuable  suggestions  for 
peace  times? 

28.  Does  hired  labor  or  "unpaid  labor"  (i.e.,  members  of  the 
farmer's  family)  make  up  the  larger  part  of  the  labor  force  which  the 
average  American  farmer  employs  ?  Does  this  vary  in  different  sec- 
tions and  with  different  types  of  farming?  What  effect  does  this 
have  on  the  quantity  and  quality  of  the  labor  which  the  farmer  uses 
in  various  operations  ? 

PROBLEMS 

1.  "In  the  period  following  the  war  progress  in  agriculture  and 
appliances  was  at  a  standstill  owing  to  the  capacity  of  the  labor.  The 
watchword  was  'cut  down,  wear  out,  and  move  on  to  more  productive 
fields/  only  to  keep  in  perpetual  motion  the  same  destructive  theory." 
Is  it  true  that  the  capacity  of  the  laborer  acts  as  a  limiting  factor  and 
determines  the  type  of  agriculture  which  may  be  followed?  Give 
some  illustrations  from  the  present,  if  possible  from  your  own  com- 
munity. 

2.  "The  labor  thus  employed  [share  system  of  the  South]  only 
works  about  seven  months  in  the  year.  The  rest  of  the  time  is 
devoted  to  loafing,  fishing,  hunting,  and  having  a  general  good  time. 
A  school  term  of  five  months  is  provided  and  paid  for  by  the  State. 
This  covers  all  the  time  that  can  be  taken  from  the  farms  during  each 
year."  Do  you  see  any  cause-and-result  connection  here?  Is  such 
a  labor  situation  hopeless?  Where  should  you  begin  if  trying  to 
effect  an  improvement  ?  What  would  be  the  condition  of  agriculture 
as  long  as  this  condition  continued  ? 

3.  "  The  Hollanders  along  the  western  shore  of  Lake  Michigan  take 
possession  of  the  low  lands  that  others  do  not  regard  as  valuable  and 
are  making  the  best  kind  of  farms."  Has  immigration  brought  us 
types  of  labor  ability  which  we  should  not  have  had  otherwise  ? 

4.  "In  the' more  intelligent  scheme  of  the  new  country  life,  the 
economic  position  of  woman  is  likely  to  be  one  of  high  importance. 
In  the  development  of  higher  (more  intensive)  farming  she  is  better 
fitted  than  the  more  muscular  but  less  patient  animal,  man,  to  carry 
on  with  care  that  work  of  milk  records,  egg  records,  etc.,  which  under- 
lies the  selection  on  scientific  lines  of  the  more  productive  strains  of 
cattle  and  poultry."  Does  this  seem  to  indicate  a  new  but  important 
possibility  ?  Is  it  analogous  to  the  field  which  women  have  come  to 
occupy  in  industrial  life  ?  Is  there  any  reason  why  the  two  cases  are 
not  parallel  ? 

5.  "A  large  supply  of  very  cheap  labor  is  sometimes  a  means  of 
getting  a  large  product  per  acre,  and  this  is  just  what  certain  mis- 


HUMAN  EFFORT  A  FACTOR  IN  PRODUCTION     19 

guided  persons,  ignorant  of  the  first  principles  of  economics,  are  con- 
stantly clamoring  for.  But  a  large  supply  of  cheap  labor  means  a 
large  number  of  families  supported  on  very  low  wages;  and  that 
means  in  turn  widespread  poverty,  which  is  precisely  what  the  study 
of  political  economy  aims  to  prevent."  Show  what  this  means  in  the 
present  stage  of  agricultural  development  in  the  United  States,  and 
point  out  what  kind  of  labor  policy  is  necessary  to  insure  a  large 
product  per  man. 

6.  "The  one  way  to  solve  the  labor  problem  is  to  organize  the 
farm  business  so  well  that  the  labor  used  on  the  farm  is  unusually 
effective.  In  other  words,  to  so  manage  the  farm  work  that  a  given 
amount  of  labor  accomplishes  more  than  on  the  average  farm."  Do 
you  agree?  How  is  this  process  to  be  carried' into  effect?  Can  we 
draw  any  lessons  from  the  management  of  labor  in  industry  ?  What 
differences  are  there  in  the  two  situations  ? 

7.  "One  of  the  greatest  sources  of  low  productivity  from  farm 
labor  is  to  be  found  in  the  amount  of  time  lost  through  unfavorable 
weather  conditions.  Until  this  leak  is  stopped  our  farms  remain 
in  a  low  state  of  efficiency  as  compared  with  other  industries."  Is 
this  true  according  to  your  observation  ?  Do  you  know  of  any  farm 
proprietor  who  has  solved  the  problem  ?  What  suggestions  can  you 
make? 

8.  "The  whole  scheme  of  labor  efficiency  in  industry  is  based  on 
division  of  labor.  But  no  such  division  is  possible  in  agriculture." 
What  are  the  gains  from  division  of  labor  ?  Is  it  entirely  absent  in 
farming?  Do  certain  new  types  of  farming  take  greater  advantage 
of  this  principle  than  the  old  ? 

ADDITIONAL  REFERENCES 

Warren,  Farm  Management,  chaps,  i  and  xi. 

Taussig,  Principles  of  Economics,  chaps,  ii  and  iii. 

Emerson,  Twelve  Principles  of  Efficiency. 

Labor,  "Factory  Management  Series/'  A.  W.  Shaw  Company. 

Hourwich,  Immigration  and  Labor,  Part  II,  chap.  v. 

Hasbach,  A  History  of  the  English  Agricultural  Labourer. 

Industrial  Commission  (1900),  Report,  Vol.  X. 

TOPICS  FOR  SPECIAL  PAPERS 

Why  the  Proportion  of  Farm  Workers  Is  Decreasing. 

What  the  Immigrant  Has  Contributed  to  American  Agriculture. 

The  Meaning  of  Efficient  Farm  Labor  and  the  Means  of  Securing  It. 

Machinery  as  a  Substitute  for  Farm  Labor. 

The  Negro  an  Indispensable  Factor  in  American  Agriculture. 

The  Possibilities  of  Specialized  Labor  in  Agriculture. 

The  New  Labor  Demands  of  American  Farming. 


V.     CAPITAL-GOODS   AS   A  FACTOR   IN  AGRICULTURAL 

PRODUCTION 

QUESTIONS 

i.  How  productive  would  a  farmer  be  today  if  he  attempted  agri- 
culture empty-handed,  without  equipment  ? 

2.  How  effective  was  the  labor  of  the  primitive  man  as  compared 
with  the  modern  farmer?  Did  he  have  any  forms  of  capital-goods 
to  aid  him  ?     How  did  he  get  them  ?     Why  ? 

3.  Give  a  definition  of  capital  and  show  why  we  use  both  the 
expressions  capital  and  capital-goods. 

4.  What  do  the  Commissioner  of  Labor  figures  indicate  as  to  the 
increase  of  technical  productivity  which  has  resulted  from  the  use  of 
farm  machinery  ?  Do  you  think  this  is  likely  to  increase  in  the  future 
as  rapidly  as  in  the  past  ? 

5.  What  other  forms  of  capital-goods  besides  the  ordinary  farm 
implements  are  being  added  to  our  farming  equipment  today  ?  Are 
irrigation  works  capital-goods  ? 

6.  Is  it  possible  that  as  the  rate  of  progress  in  one  direction  tends 
to  slow  down  we  may  find  a  more  rapid  addition  to  our  productive 
equipment  in  some  other  direction?  In  what  fields  of  capital  de- 
velopment other  than  farm  machinery  are  we  making  rapid  advance 
today  ? 

7.  Show  the  relation  which  the  amount  of  farm  capital  bears  to 
the  farmer's  return  from  labor.  What  relation  does  the  capacity  of 
the  farmer  bear  to  this  problem  ? 

8.  Does  the  increase  in  the  capital  factor  demand  a  proportionate 
increase  in  the  capacity  and  training  of  the  farmer  ?  mechanical  train- 
ing ?     what  other  kinds  ? 

9.  Is  it  in  this  connection  particularly  that  economic  training  is 
significant  ?     Explain. 

10.  If  one  needs  to  be  a  good  mechanic  in  order  to  get  the  best 
performance  from  a  tractor  and  to  prevent  undue  deterioration  of  the 
machine,  does  one  need  to  be  a  good  economist  in  order  that  capital 
may  be  employed  most  effectively  and  that  capital  value  may  not  be 
dissipated  even  while  physical  property  remains  intact  ?     Explain. 

n.  How  much  capital  does  the  average  American  farmer  under- 
take to  employ  today  ?  In  what  forms  is  it  ?  What  seems  to  be  the 
outlook  for  the  future  ?  t 

12.  Does  the  economic  efficiency  of  a  piece  of  farm  equipment 
depend  only  on  its  technical  performance  or  does  it  depend  also  on 
how  it  is  fitted  into  the  farm  enterprise  ?    Explain  and  illustrate. 


CAPITAL-GOODS  A  FACTOR  IN  PRODUCTION  21 

13.  Must  the  size  of  the  man,  the  size  of  the  machine,  and  the 
size  of  the  farm  be  adjusted  to  each  other?  What  difficulties  does 
this  present  ?    How  can  they  be  met  ? 

14.  Should  the  different  forms  of  capital-goods  be  adjusted  with 
reference  to  each  other  ?    What  is  the  result  if  they  are  not  ? 

15.  What  factor  is  often  neglected  in  this  apportionment  of  the 
farm  capital  ?    Why  is  this  so  ?    What  results  follow  ? 

16.  Does  the  productivity  of  the  various  capital-goods  vary 
exactly  in  accordance  with  their  market  price?  Are  these  dis- 
crepancies sometimes  large?  Illustrate.  Does  this  cause  a  par- 
ticular importance  to  attach  to  the  selection  of  the  particular  article 
to  be  purchased  ? 

17.  Are  farmers  as  a  rule  shrewd  buyers  ?  stingy  buyers  ?  lavish 
buyers?  gullible  buyers?  intelligent  buyers?  Try  to  assign  the 
reasons  in  each  answer  that  you  give. 

18.  Is  the  buying  function  of  the  farmer  becoming  constantly 
more  important  ?    Why  ?     More  difficult  ?    Why  ? 

19.  How  can  the  farmer  protect  himself  or  be  protected  in  this 
regard?     See  what  activities  your  state  undertakes  along  this  line. 

20.  What  is  meant  by  depreciation  ?  Can  this  be  reduced  in  the 
case  of  most  American  farms  ?    How  ? 

21.  Can  depreciation  be  entirely  eliminated  ?  Should  the  farmer 
take  account  of  the  actual  rate  of  depreciation  of  capital-goods  in 
figuring  his  profits  and  planning  his  future  enterprises  ?     Show  why. 

22.  Do  we  expect  capital  in  the  long  run  to  maintain  itself? 
How  ?    To  increase  in  amount  ?    How  ? 

23.  Is  the  process  of  replacement  or  further  accumulation  an 
automatic  one  ?    What  part  must  the  farmer  take  ? 

24.  In  general,  do  we  expect  farmers  to  supply  the  capital  for  the 
agricultural  industry  or  do  we  expect  them  to  use  others'  capital? 
What  is  necessary  if  they  are  to  secure  a  supply  of  capital  from  out- 
side sources  ?  Must  the  one  who  supplies  such  capital  know  that  his 
money  is  safely  employed  ?  that  it  is  profitably  employed  ?  What 
does  this  require  of  the  farmer  ? 

25.  Explain  the  relation  of  insurance  to  the  question  of  capital 
conservation.  Is  insurance  or  prevention  better  ?  Does  the  system 
of  insurance  tend  actually  to  reduce  the  amount  of  losses  ?    How  ? 

PROBLEMS 

1.  "There  is  an  important  difference  between  land  and  capital- 
goods  in  that  when  more  capital-goods  are  wanted  it  is  usually  the 
more  productive  forms  which  are  made,  while  an  increase  in  the 
amount  of  land  under  cultivation  usually  requires  that  less  productive 


22  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

land  be  resorted  to."  Can  you  illustrate  this  proposition  from  actual 
experience  ?  If  it  is  true,  would  it  seem  to  show  that  the  condition 
of  the  farmer  and  indeed  of  the  whole  human  family  may  be  made 
economically  better  as  time  goes  on?  What  one  condition  would 
have  to  be  observed  if  we  are  to  benefit  from  the  increasing  efficiency 
of  capital-goods  ? 

2.  "The  trouble  with  most  farmers  is  that  they  have  bought  their 
equipment  in  response  to  the  solicitation  of  some  fellow  who  had  a 
machine  he  wanted  to  sell,  instead  of  buying  only  those  things  for  which 
they  knew  there  was  a  real  need,  in  fact  the  most  important  need  for 
their  particular  farm  operations.  Many  a  farmer  finds  himself 
limited  because  he  can't  make  a  certain  expenditure  for  a  breeding 
animal,  some  fertilizer,  or  a  piece  of  machinery  and  has  only  himself 
to  thank  for  it,  because  he  spent  his  money  for  some  fool  thing  that 
he  didn't  need  and  that  won't  work  anyhow."  Is  such  a  condition 
more  true  in  some  sections  than  in  others?  of  some  classes  than  of 
others  ?  How  can  the  farmer's  capital  be  conserved  and  more  profit- 
ably directed  ? 

3.  "The  use  of  the  tractor  is  not  wholly  a  question  of  cheaper  or 
more  convenient  operation,  but  also  of  having  enough  power  to  do 
certain  farm  tasks.     Only  with  a  tractor  can  plows  and  discs  be  put 

down  to  proper  depth  for  summer  and  fall  plowing It  requires 

a  better  workman  to  keep  a  tractor  running  efficiently  than  it  does 
to  operate  a  team."  Pick  out  several  other  cases  which  illustrate  the 
fact  that  the  character  of  capital-goods  determines  the  possibilities  of 
farm  operation  and  the  nature  of  the  labor  demand.  Can  you  cite 
any  product  we  could  not  raise  at  all  if  it  were  not  for  mechanical 
aids  to  production  ? 

4.  "Agriculture  can  be  conducted  with  much  or  little  capital  as 
conditions  dictate.  While  a  man  with  little  capital  will  always  work 
at  a  disadvantage,  it  is  possible  for  him  to  begin  with  greater  chances 
of  success  than  in  many  other  lines  of  effort."  Is  this  true?  Ex- 
plain and  criticize. 

ADDITIONAL  REFERENCES 

Taussig,  Principles  of  Economics,  chap.  v. 

Quaintance,  The  Influence  of  Farm  Machinery  on  Production  and  Labor , 
"Publications  of  the  American  Economic  Association, "  3d  Series, 
Vol.  V. 

McDowell,  "Influence  of  Age  on  the  Value  of  Dairy  Cows  and  Farm  Work 
Horses,"  Bulletin  413,  U.S.  Department  of  Agriculture. 

Valgren,  "Farmers'  Mutual  Fire  Insurance,"  Yearbook  of  the  U.S.  Depart- 
ment of  A  griculture,  1 9 1 6 . 

Cyclopedia  of  American  Agriculture,  Vol.  I,  chaps,  v  and  vi. 


CAPITAL-GOODS  A  FACTOR  IN  PRODUCTION  23 


TOPICS  FOR  SPECIAL  PAPERS 


The  Advent  of  Capitalism  in  Agriculture. 
Agricultural  Capital  as  the  Basis  of  Social  Progress. 
The  Delicate  Task  of  Conserving  Farm  Capital. 
Pirates  Who  Prey  on  the  Farmers'  Capital  Fund. 
Economic  Bases  for  Comparing  Horses  and  Tractors. 


VI.    ORGANIZATION  AND  MANAGEMENT  OF  THE  AGRI- 
CULTURAL ENTERPRISE 

QUESTIONS 

i.  Is  there  a  function  of  organization  or  business  enterprise  which 
constitutes  a  fourth  factor  of  production  similar  to  land,  labor,  and 
capital  ? 

2.  What  are  the  attributes  by  which  we  may  distinguish  it?  Is 
it  separate  from  labor  ? 

3.  The  other  factors  are  quantitative,  are  they  not?  also  qualita- 
tive ?  Is  organization  or  entrepreneurship  qualitative  ?  quantitative  ? 
Explain. 

4.  May  we  now  put  in  a  fourth  factor  in  our  equation  of  produc- 
tion— E  ?    Shall  we  give  it  an  exponent  ?   a  coefficient  ? 

5.  Does  it  perhaps  indicate  rather  the  power  to  which  the  three 
quantitative  factors  are  raised?    How  would  this  be: 

(ioZ/'+6^+3C0e=  15P? 

This  indicates  roughly  that  the  coefficients  of  land  are  fertility  and 
location;  of  labor,  the  efficiency  of  the  worker;  and  of  capital,  the 
technical  quality  of  the  capital-good.  Modifying  the  whole  equation 
is  the  efficiency  of  the  organization  in  which  they  are  joined,  expressed 
here  by  the  coefficient  e  outside  the  trinomial. 

6.  Show  that  the  law  of  diminishing  returns  applies  equally  to 
each  of  the  factors  of  production.  Does  the  expression  "law  of  com- 
bining proportions''  seem  to  you  to  express  this  idea  more  clearly 
than  the  older  expression  "diminishing  returns"  ? 

7.  Does  this  same  question  of  most  profitable  proportion  come  up 
in  connection  with  the  relationship  of  various  farm  enterprises  one  to 
another?  For  instance,  how  many  chickens  will  give  the  greatest 
profit  on  a  farm  which  has  a  certain  acreage  in  grain,  a  certain  num- 
ber of  livestock,  and  a  certain  number  of  women  and  children  in  the 
family  ? 

8.  Show  that  this  is  the  real  problem  of  one-crop  v.  diversified 
agriculture. 

9.  Show  that  the  same  issue  is  involved  in  the  most  profitable 
adjustment  of  agriculture  to  our  industrial  development,  commercial 
facilities,  and  the  whole  complex  of  economic  activities. 

10.  Show  that  a  wise  choice  of  enterprises  is  the  beginning  of  wis- 
dom for  the  farmer. 

24 


ORGANIZATION  OF  AGRICULTURAL  ENTERPRISE        25 

11.  Does  the  choice  of  location  come  next  in  importance?  Are 
these  two  questions  separate  or  more  or  less  bound  up  together? 
Explain  and  illustrate. 

12.  Will  the  amount  and  kind  of  land  that  the  farm  manager 
chooses  be  determined  solely  by  the  kind  of  farming  he  likes  best? 
Does  society  have  any  way  of  telling  him  what  it  most  needs  him  to 
do  ?  How  ?  Does  he  always  heed  ?  Can  you  trace  any  sequence  of 
results  if  he  does  or  does  not  follow  this  line  ? 

13.  Are  both  the  individual  and  society  constrained  to  fit  their 
preferences  to  the  sort  of  natural  resources  available  ?    Illustrate. 

14.  Is  the  course  of  business  enterprise  also  deflected  by  the  num- 
ber and  character  of  laborers  available?  How  does  such  a  process 
work  itself  out? 

15.  Is  the  organization  of  the  agricultural  industry  also  modified 
by  such  limiting  factors  as  the  scarcity  of  the  capital  fund  or  the 
efficiency  of  capital-goods  ? 

16.  Show  that  this  whole  process  is  to  be  explained  in  terms  of  the 
mutual  adjustment  and  readjustment  of  the  prices  of  products  and 
of  the  component  cost-goods  which  enter  into  their  production. 

17.  Let  us  then  go  back  to  the  fundamental  proposition  of  chap- 
ter i,  viz.,  that  the  modern  business  farmer  must  take  his  place  in  a 
commercial  system  organized  upon  a  basis  of  price.  In  making  his 
decisions  as  organizer  and  manager  as  to  what  to  produce  and  what 
to  use  in  producing  it,  is  it  his  task  to  bring  about  wholesome  relation- 
ships among  these  various  price-goods  ? 

18.  Is  his  own  personal  profit  involved?  How?  Is  the  welfare 
of  others  ?     Explain. 

19.  Can  you  illustrate  these  general  propositions  with  reference 
to  the  redirection  of  farm  enterprise  in  the  United  States  in  connection 
with  the  European  war  ? 

20.  We  are  now  in  a  position  to  view  the  problem  of  the  proper 
degree  of  intensity  of  cultivation  more  adequately.  Is  extensive  agri- 
culture characteristic  of  periods  of  cheap  land?  Why?  Does  the 
speculative  fever  often  lead  men  under  such  circumstances  to  buy 
more  land  than  they  can  work  to  the  greatest  advantage  ?  Why  can 
they  not  work  it  to  advantage  ? 

21.  Under  such  circumstances  what  policy  should  be  followed  in 
order  to  secure  the  greatest  profit?  Note  here  that  there  may 
be  two  quite  distinct  questions  involved,  one  as  to  the  maximum 
physical  product  and  the  other  the  price  received  from  a  crop  of 
given  size. 

22.  Show  clearly  the  difference  between  the  size  of  farm  and  the 
size  of  farm  business.  Is  the  size  of  farms  in  the  United  States  increas- 
ing or  decreasing  ?    Why  ?    What  of  the  future  ? 


26  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

23.  Is  the  size  of  the  farm  business  increasing  or  decreasing? 
Why?  What  circumstances  enable  a  farmer  to  conduct  a  bigger 
business  on  a  given  acreage?  Does  a  bigger  business  mean  a  more 
profitable  business  ? 

24.  What  acreage  appears  to  be  most  profitable  at  the  present  time? 
What  is  the  limiting  factor  ?    Is  this  limit  likely  to  be  pushed  outward  ? 

25.  The  scientific- management  movement  in  industry  today  lays 
much  stress  upon  plant  design  and  shop  management.  Do  these 
questions  have  equal  importance  to  the  farm  manager  ? 

26.  What  are  the  principal  considerations  to  be  taken  into  account 
in  the  lay-out  of  the  farm  ?     Give  reasons. 

27.  Point  out  the  importance  and  possibilities  of  a  working  plan 
for  man  labor;  for  horse  labor.  Can  efficiency  be  carried  as  far  in 
this  direction  by  the  farmer  as  by  the  manufacturer?  Why?  Be 
very  careful  in  answering  this  question.  Don't  imagine  that  all  fac- 
tories are  100  per  cent  efficient,  nor  be  modest  about  the  possibilities 
of  really  scientific  farming. 

28.  Show  the  importance  of  the  problem  of  how  to  buy  raw  mate- 
rial, e.g.,  feedstuffs  or  fertilizer.  If  we  say  that  a  dairyman  is  buying 
the  wrong  feed  in  spite  of  the  fact  that  his  cattle  are  thriving,  what  do 
we  mean  ?  Has  he  harmed  anyone  by  so  doing  ?  Is  this  a  concrete  case 
under  the  general  issue  discussed  in  questions  16-18,  above  ?    Explain. 

29.  What  are  the  advantages  of  the  family  system  as  a  form  of 
farm  organization  ?  Has  it  also  some  weaknesses  and  defects  ?  What 
are  they  ? 

30.  What  changes  have  come  about  in  the  organization  of  other 
industries  which  have  already  passed  out  of  the  family  system? 
Have  these  marked  gains  in  economic  efficiency  ?  Have  social  prob- 
lems been  created  thereby  ?  Do  they  appear  to  be  in  process  of  being 
solved  or  to  be  growing  worse  ? 

31.  Would  it  be  possible  to  carry  these  industrial  types  of  organi- 
zation over  into  agriculture  ?  Why  should  we  desire  to  do  so  ?  Why 
hesitate  ? 

32.  Point  out  the  principal  advantages  of  having  a  larger  unit  of 
operation  in  agriculture.  Might  this  end  be  secured  by  other  means 
than  the  resort  to  industrial  forms  of  organization  ?    Explain. 

^.  Even  if  we  have  operating  units  of  the  most  efficient  size,  may 
it  be  desirable  to  have  a  larger  unit  of  commercial  organization  or 
financial  control?  Is  this  the  situation  in  the  great  industrial  cor- 
porations? Are  there  any  attendant  disadvantages  or  dangers? 
May  they  be  eliminated  ? 

34.  May  these  advantages  be  secured  by  farmers  through  co- 
operative organization?  Does  such  organization  avoid  the  dangers 
of  large-scale  corporations  ? 


ORGANIZATION  OF  AGRICULTURAL  ENTERPRISE       27 

35.  Analyze  the  theory  of  co-operative  organization  carefully,  in 
such  a  way  as  to  show  specifically  how  it  is  capable  of  securing  more 
efficient  use  of  (a)  natural  resources,  (b)  labor  powers,  (c)  capital. 
How  about  skill  of  business  enterprise  under  co-operation  ?  How  is 
control  exercised  ?    Is  it  sufficiently  centralized  ? 

PROBLEMS 

1.  "On  the  average  American  farm  there  are  areas  of  waste  land. 
Some  of  these  can  never  be  profitably  reclaimed,  but  others  found  on 
about  all  farms  may  be  termed  wasted  areas.  They  are  so  misused 
that  they  produce  nothing."  Does  such  a  situation  present  a  problem 
to  the  farm  organizer,  e.g.,  to  find  an  enterprise  suited  to  those 
neglected  and  perhaps  ill-favored  areas,  to  marshal  the  labor  and 
capital  necessary  to  reclaim  them,  etc.  ?  Explain  fully  in  terms  of  the 
business  organizer's  function.  Might  the  same  general  proposition  be 
applied  to  wasted  labor  and  wasted  capital-goods  ? 

2.  "It  was  found  that  specialized  farms,  those  of  tobacco,  stock, 
or  dairy  type  moderately  diversified,  are  the  most  efficient  in  this 
region  and  that  the  general  mixed  farms,  more  highly  diversified,  are 
the  least  efficient."  Does  such  a  situation  seem  to  you  peculiar  to 
the  region  referred  to  (the  bluegrass  section  of  Kentucky)  or  is  this 
form  of  organization  likely  to  bring  maximum  profits  under  all  cir- 
cumstances ?     (See  questions  6-8.) 

3.  "  Certain  enterprises  may  be  distinctly  profitable  when  occupy- 
ing a  minor  position  in  the  farm  business  and  distinctly  unprofitable 
if  made  major  enterprises."  Examine  the  farming  of  some  particular 
locality  to  ascertain  whether  this  proposition  is  true  and  whether  exist- 
ing practices  are  well-  or  ill-advised  if  measured  by  this  test. 

4.  "The  head  of  a  large  factory  can  devise  means  for  supervising 
his  men  and  for  securing  the  execution  of  his  orders.  But  the  owner 
of  a  farm  can  use  hired  labor  to  advantage  only  when  his  own  example 
and  his  own  oversight  supply  the  needed  stimulus.  The  tasks  of 
twenty  men  engaged  in  farming  would  be  spread  over  several  hundred 
acres  and  must  present  troublesome  questions  in  assigning  and  super- 
vising the  work."  Does  this  mean  that  farms  must  be  limited  to  a 
few  hundred  acres  employing  not  more  than  five  persons  the  year 
around  ? 

Farmer  X  has  his  office  at  the  top  of  his  house,  which  is  located 
on  a  hill  overlooking  his  farm.  He  has  equipped  it  with  a  telescope 
with  which  he  watches  his  field  hands,  and  he  also  has  a  Ford  with 
which  to  get  quickly  to  any  part  of  the  farm.  Do  these  devices 
enable  him  to  supervise  his  men  adequately  ?  For  how  large  a  labor 
force  and  for  how  large  an  area  do  you  think  such  methods  would  be 


28  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

effective  t  Might  it  be  extended  still  farther  by  the  use  of  field  tele- 
phones? Can  you  think  of  still  other  means  of  overcoming  the 
factor  of  distance  in  supervising  the  operations  of  a  farm  ? 

5.  "Profits  can  be  increased  most  easily  by  attention  to  the  weak- 
est points  in  a  system  of  farming.  The  more  vital  the  weakness,  the 
greater  the  increase  in  profits  that  can  easily  be  made.  It  is  both 
easier  and  more  profitable  to  increase  low  acre  yields  than  high  ones 
and  a  small  product  per  cow  than  a  large  one."  Explain,  relating 
your  answer  to  the  principle  of  diminishing  returns.  Is  this  a  uni- 
versally valid  statement  ?  Would  it  apply  to  the  agriculture  of  the 
whole  country  as  well  as  to  the  practice  of  a  single  farm?  By  "low 
yield"  does  the  writer  mean  low  absolutely  or  relatively  to  the  capacity 
of  given  instruments  of  production?  How  is  capacity  to  be  deter- 
mined ? 

6.  "The  Vegetable  Growers'  Co-operative  Association  of 

have  recently  employed  an  expert  to  superintend  their  operations  and 
make  researches  into  the  celery  and  tomato  diseases  which  have  been 
interfering  with  their  success  during  the  last  few  years."  Explain 
this  in  terms  of  efficient  organization  of  agriculture. 

ADDITIONAL  REFERENCES 

Card,  Farm  Management. 

Pratt,  The  Organization  of  Agriculture. 

Powell,  Co-operation  in  Agriculture,  chaps,  i,  ii,  v,  vi. 

Wolff,  Co-operation  in  Agriculture,  chap.  xiii. 

Fay,  Co-operation  at  Home  and  Abroad. 

Aldridge,  Farming  Corporations. 

Levy,  Large  and  Small  Holdings. 

Carpenter,  Profit  Making  in  Shop  and  Factory  Management. 

Bilings,  Seasonal  Distribution  of  Farm  Labor,  Chester  County,  Penn. 

Bulletin  528,  U.S.  Department  of  Agriculture. 

Humphrey,  "Labor  Requirements  of  Dairy  Farms  as  Influenced  by  Milking 

Machines,"  Bulletin  423,  U.S.  Department  of  Agriculture. 
Mowry,  "The  Normal  Day's  Work  of  Farm  Implements,  Workman  and 

Crews  in  Western  New  York,"   Bulletin  412,   U.S.  Department  of 

Agriculture. 

TOPICS  FOR  SPECIAL  PAPERS 

The  Place  of  the  Promoter  in  Agriculture. 

Choice  of  Crops  as  a  Factor  in  Farm  Organization. 

The  County  Agent  as  a  Factor  in  Agricultural  Organization. 

Business  Enterprise  in  Farming. 

Scientific  Management  on  the  Farm. 

An  Analysis  of  Co-operation  as  a  Type  of  Agricultural  Organization. 


VII.    RECORDS  AND  ACCOUNTS  AS  MEASURES  OF 
EFFICIENT  MANAGEMENT 

QUESTIONS 

i.  What  is  the  purpose  of  a  system  of  accounts?  Are  financial 
items  the  only  ones  which  should  be  recorded  ?     Explain. 

2.  What  is  the  nature  and  purpose  of  "production  records"  on 
a  farm? 

3.  Should  the  farmer  take  a  financial  measurement  of  his  business 
at  stated  intervals  ?    What  is  its  purpose  ? 

4.  Why  is  a  system  of  running  accounts  without  periodic  inven- 
tory as  likely  to  deceive  the  farmer  as  to  enlighten  him  ? 

5.  What  difficulties  are  met  with  in  making  a  satisfactory  inven- 
tory ?  Is  it  true  that  the  accountant  starts  out  with  certain  figures 
of  his  own  making  and  that,  no  matter  how  accurate  his  method,  the 
results  cannot  be  any  more  correct  than  the  figures  with  which  he 
starts,  or  which  he  introduces  at  later  stages  ? 

6.  Is  it  possible  to  secure  units  of  valuation  based  upon  a  large 
number  of  cases  treated  statistically  ? 

7.  What  is  depreciation  ?  appreciation  ?  What  benefit  should  the 
farmer  derive  from  keeping  a  careful  record  of  these  items  ? 

8.  Should  profits  or  losses  due  to  changing  values  of  the  farm 
property  be  kept  separate  from  profits  or  losses  from  operation  ?  Do 
you  know  of  farmers  who  deceive  themselves  by  not  separating  these 
accounts  ? 

9.  The  financial  statement  of  the  ordinary  commercial  enterprise 
shows  " resources  and  liabilities."  What  is  meant  by  these  terms? 
by  "net  worth"? 

10.  What  would  appear  on  the  liability  side  of  the  farmer's  finan- 
cial statement  ?  If  he  has  no  outstanding  obligations,  would  a  sum- 
mary statement  of  his  inventory  constitute  his  financial  statement  and 
show  his  net  worth  ? 

n.  How  should  records  of  current  receipts  and  expenses  be  kept  ? 
What  is  a  ledger  ?     May  the  farm  accounts  be  kept  in  this  book  alone  ? 

12.  What  is  a  journal  ?    a  cash  book  ? 

13.  Since  the  farmer  wishes  to  use  as  few  books  as  possible  and 
since  his  transactions  are  usually  neither  numerous  nor  complicated, 
what  book  or  books  should  he  use  ?     Why  ? 

14.  If  one  is  to  get  the  greatest  benefit  from  the  keeping  of 
accounts,  what  comparisons  does  he  need  to  make  besides  the  com- 
parison of  his  own  financial  situation  from  year  to  year  ? 

29 


30  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

15.  Is  it  important  also  that  he  discover  the  source  of  his  profits 
or  losses  ?  Do  production  records  show  the  source  of  gain  or  loss  ? 
its  amount  ?  Do  general  accounts  show  amount  of  gain  or  loss  ?  its 
source  ? 

16.  What  is  "cost  accounting''  ?  What  records  other  than  those 
we  have  been  considering  will  be  needed  in  a  system  of  cost  accounts  ? 

17.  What  are  overhead  charges  and  what  difficulties  do  they  pre- 
sent in  cost  accounts  ?    How  may  these  be  met  ? 

18.  What  principle  should  be  followed  in  the  charging  for  labor 
or  materials  which  are  used  in  a  particular  enterprise  but  which  would 
not  otherwise  command  any  price  ? 

19.  Show  how  cost-accounting  methods  reveal  the  competitive  or 
non-competitive  character  of  farm  enterprises.  How  does  this  affect 
the  farmer's  practice  ? 

20.  Is  the  value  of  cost  accounting  on  the  farm  to  be  found  in  the 
absolute  figures  obtained  or  in  the  comparative  results  (e.g.,  year  with 
year  under  changed  methods,  one  crop  with  another,  etc.)  ? 

21.  Does  the  manufacturer  use  "cost  of  production"  figures  in 
such  a  way  as  to  influence  the  making  of  prices  ?  Does  the  farmer 
do  so? 

PROBLEMS 

1.  "It  is  probable  that  no  other  business  followed  for  sole  support 
could  long  survive  the  lack  of  an  accounting  system;  yet  in  spite  of 
this  lack  the  farming  business  continues  to  prosper. ! '  Can  you  explain 
why  the  situation  with  reference  to  farm  accounts  differs  somewhat 
from  other  industries?  Is  that  difference  becoming  less  today? 
Why? 

2.  "More  farmers  fail  of  financial  success  from  a  lack  of  business 
methods  and  proper  records  than  from  ignorance  in  handling  land, 
plants,  and  animals,  and  in  making  them  thrive."  Do  you  agree? 
Can  you  show  certain  particulars  in  which  business  methods  are  likely 
to  be  improved  as  a  direct  result  of  the  existence  of  a  system  of 
accounts?  Might  some  business  blunders  occur  even  on  a  farm 
which  had  an  admirable  set  of  books?  Is  it  conceivable  that,  if  a 
very  elaborate  set  of  books  is  undertaken,  time  may  be  spent  upon 
them  which  would  be  better  employed  in  some  active  farm  work  ? 

3.  "Many  farmers  have  found  a  diary  a  helpful  means  of  keeping 
a  fairly  complete  record  of  their  farm  buisness.  With  a  little  care  and 
thought  the  value  of  a  diary  for  this  purpose  can  be  greatly  increased. 
With  some  extra  pages  in  the  back  for  the  farm  inventory  and  sum- 
mary, this  book  can  easily  be  used  to  keep  financial  records  of  the 
farm  business."  Is  such  a  system  a  happy  mean  between  the  slipshod 
methods  of  the  farm  without  any  financial  record  and  the  one  which 


ACCOUNTS  AS  MEASURES  OF  MANAGEMENT  31 

employs  labor  on  the  books  under  conditions  of  diminishing  returns 
as  compared  with  other  farm  employments  ?  For  what  sort  of  farm 
accounting  is  the  diary  method  adequate  ?     What  are  its  limitations  ? 

4.  "Most  of  the  bulletins  on  farm  bookkeeping  and  farm  costs 
deal  with  the  subject  from  a  purely  statistical  point  of  view  without 
involving  principles  of  double-entry  bookkeeping.  Very  often  they 
fail  to  provide  for  proper  correlation  and  interpretation  of  results  after 
they  are  obtained."  Does  this  involve  one  criticism  or  two  of  ordi- 
nary methods  of  farm  accounting?  What  are  the  merits  of  the 
double-entry  system?  May  single-entry  accounts  be  "properly  cor- 
related and  interpreted"  ? 

5.  "When  economic  conditions  have  so  changed  as  to  make  it 
necessary  to  keep  accounts  on  the  farm,  the  farmer  who  says  he  doesn't 
have  time  to  keep  them  will  be  about  as  well  off  as  if  he  told  the  ele- 
vator owner  to  destroy  the  grain  check,  as  he  didn't  have  time  to  call 
for  it.  In  either  case  he  is  not  getting  all  he  should  from  the  operation 
of  the  farm."  Are  the  two  cases  precisely  analogous  ?  Explain  fully. 
Expound  the  word  "necessary"  in  this  quotation. 

ADDITIONAL  REFERENCES 

Scovill,  Farm  Accounting.    (In  press.) 

Roberts,  The  Farmer's  Business  Handbook. 

Warren,  Farm  Management,  chaps,  xvi  and  xvii. 

Cyclopedia  of  American  Agriculture,  Vol.  IV,  chap.  vi. 

Thomson,  "The  Use  of  a  Diary  for  Farm  Accounts,"  Farmer's  Bulletin  782, 

U.S.  Department  of  Agriculture. 
Mowry,  "Machinery  Cost  of    Farm  Operations  in  Western  New  York," 

Bulletin  338,  U.S.  Department  of  Agriculture. 
Valentine,  American  Economic  Review,  Supplement,  March,  1913,  p.  102. 
(Also  numerous  cost-of-production  studies   of  the  U.S.  Department  of 

Agriculture  and  state  experiment  stations.) 

TOPICS  FOR  SPECIAL  PAPERS 

How  to  Make  a  Farm  Inventory. 

Outline  of  a  Particular  Set  of  Accounts  and  Their  Results. 
The  Role  of  Cost  Accounting  in  Modern  Farming. 
Work  Records  and  Their  Use. 


VIII.    PRINCIPLES  OF  VALUE  AND  PRICE  AS  RELATED 
TO  FARM  PRODUCTS 

QUESTIONS 

i.  Distinguish  between  price,  exchange- value,  and  utility. 

2.  Which  one  of  these  coincides  with  the  "actual  value"  or  "fair 
price"  to  which  people  so  frequently  refer? 

3.  Is  value  a  quality  which  is  absolute  or  relative  ?  Does  it  reside 
inside  an  article  or  is  it  extrinsic  to  it  ? 

4.  So  long  as  an  article  remains  unchanged,  is  its  value  unchanged  ? 
In  your  answer  do  you  consider  that  an  article  is  unchanged  only  so 
long  as  its  form  or  appearance  is  the  same  ?  Would  its  value  be 
affected  by  a  mere  change  in  location  ?   a  change  in  time  ? 

5.  Does  the  market  value  of  barley  and  rye  in  the  United  States 
depend  upon  the  character  of  these  grains  or  upon  the  nationality  of 
our  people  or  upon  both  ? 

6.  Do  you  think  that  the  market  prices  of  any  of  our  agricultural 
products  would  be  revised  if  all  private  incomes  above  $5,000  were 
suddenly  swept  away  ?  if  every  family  were  assured  an  income  of  at 
least  $3,000?    What  is  the  meaning  of  "effectual  demand"  ? 

7.  We  often  say  that  prices  are  low  because  the  supply  exceeds 
the  demand.  Is  this  expression  accurate  and  complete  ?  If  supply 
is  in  excess  of  all  demand,  what  will  be  the  price  of  the  article  ? 

8.  Show  how  youf  own  demand  for  fresh  fruit  is  affected  by  the 
principle  of  diminishing  utility.     What  is  marginal  utility? 

9.  What  is  a  marginal  consumer?  Explain  the  nature  of  his 
influence  upon  prices. 

10.  In  the  case  of  crops  which  come  upon  the  market  in  large  bulk 
during  a  short  harvesting  season,  does  the  idea  of  marginal  utility 
of  a  last  unit  hold  good  ?  Which  bushels  of  wheat  mark  the  margin 
of  wheat  consumption  ? 

11.  What  idea  of  marginal  utility  governs  the  thrifty  housekeeper 
when  she  is  purchasing  a  winter  supply  ofapples  in  the  fall  ?  Does 
the  quantity  stored  depend  upon  what  suppliers  areasking  for  their 
stocks  ? 

12.  Explain  what  is  meant  by  a  demand  schedule.  Draw  up  a 
schedule  of  the  demand  for  cranb  erries  in  accordance  ii  hnthe  data 
in  selection  146. 

13.  Make  a  demand  schedule  for  potatoes  accord wg  tot  the  best 
information  you  can  get.  Make  another  for  grapefruit.  How  do 
they  differ  ?    Why  ? 

32 


VALUE  AND  PRICE  AS  RELATED  TO  FARM  PRODUCTS     33 

14.  If  a  crop  were  doubled,  would  its  price  fall  one-half  ?  Look 
up  actual  price  figures  in  the  Yearbook  of  the  United  States  Department 
of  Agriculture  or  elsewhere  and  compare  the  prices  of  good  and  poor 
crop  years. 

15.  If  it  appears  that  changes  in  supply  result  in  more  abrupt 
changes  in  the  price  of  some  goods  than  in  the  case  of  others,  how  do 
you  explain  it  ? 

16.  In  your  own  feelings,  do  you  find  that  added  units  of  some 
goods  are  accompanied  by  a  more  rapidly  diminishing  utility  than 
others?  Illustrate.  Does  your  demand  for  some  articles  seem  to 
expand  indefinitely? 

17.  What  is  meant  by  elastic  demand?  inelastic  demand ?  Give 
several  illustrations  of  each.  Are  there  two  separate  classes  of  de- 
mand or  is  it  merely  a  question  of  degree  ? 

18.  If  there  are  several  different  uses  to  which  a  given  article  is 
put,  does  that  increase  or  decrease  the  elasticity  of  its  demand  ? 

19.  Does  the  existence  of  several  fairly  satisfactory  substitutes  for 
a  certain  product  have  an  effect  upon  the  demand  for  it  ?  Does  it 
make  the  demand  more  or  less  elastic  ? 

20.  Explain  the  effect  that  both  these  conditions  (questions  18  and 
19)  are  likely  to  have  upon  prices. 

21.  Is  the  demand  for  agricultural  products  in  general  elastic 
or  inelastic?  Is  there  evident  difference  in  the  case  of  articles 
of  food  and  articles  of  wear?  What  other  important  classes  are 
there  ? 

22.  Is  our  demand  for  food  as  such  or  for  certain  articles  of  food  ? 
for  clothing  or  for  certain  textiles,  skins,  or  other  covering? 

23.  Are  the  great  expenditures  of  bon  vivants  incurred  to  secure 
(a)  quantity?  (b)  quality?  (c)  service?  What  do  you  mean  by 
quality  in  this  connection:  (a)  nutriment?  (b)  delicacy?  (c)  rarity? 
How  about  the  social  cost  and  return  of  such  expenditures  ? 

24.  Does  the  cost  of  high  living  for  some  increase  the  high  cost  of 
living  to  others  ?     Explain  your  whole  chain  of  reasoning. 

25.  In  general,  does  our  demand  for  agricultural  products  rest 
upon  a  rational  basis?  Are  some  of  our  demands  irrational?  If 
possible,  find  in  your  own  community  an  illustration  of  supplying  the 
market  with  a  poorer  instead  of  a  better  article  simply  because  the 
buyer  demands  it. 

26.  Millers  say  that  the  consumer  demands  bolted  flour  and 
polished  rice.  Does  the  housewife  know  that  there  is  any  other  kind 
of  rice  or  does  she  know  the  merits  of  other  flour  ?  How  did  present 
standards  come  into  use? 

27.  Does  the  average  consumer  need  the  assistance  of  a  pure-food 
inspector  and  a  health  department  to  instruct  and  direct  his  demand 


34  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

in  the  present-day  market?     Can  you  cite  any  case  in  which  they 
appear  to  have  set  up  an  ill-advised  standard  for  consumers  ? 

28.  In  what  other  ways  does  the  government  step  in  and  alter 
the  character  of  public  demand?  What  would  be  the  effect  of  an 
embargo  upon  the  export  of  agricultural  products  ? 

29.  Show  how  public  opinion  may  become  a  powerful  factor  in 
demand. 

30.  By  "supply"  do  you  mean  the  total  amount  of  goods  in 
existence  v.  stock?  What  other  factors  may  enter  into  the  supply 
idea? 

31.  Is  the  supply  of  agricultural  commodities  limited  absolutely 
or  only  relatively  ? 

32.  May  the  supply  of  an  article  which  over  a  period  of  years  is 
only  relatively  limited  be  absolutely  limited  in  a  certain  city  at  a 
certain  time? 

^.  Suppose  that  there  is  a  very  large  quantity  of  peaches  in  the 
Chicago  market  upon  a  given  day;  does  the  whole  of  this  amount 
exert  an  influence  upon  the  determination  of  prices  then  and  there  ? 

34.  Suppose  that  there  is  an  equivalent  abundance  of  wheat  in 
Chicago;  does  it  have  an  equally  immediate  and  intense  effect  upon 
wheat  prices  ?    Explain  both  cases  fully. 

35.  Do  weather  conditions  represent  absolute  factors  in  the  supply 
of  agricultural  products?  Can  the  reduction  of  supplies  due  to 
unfavorable  weather  conditions  be  partially  offset  by  additional  out- 
lays of  labor  and  capital  upon  the  crop  ? 

36.  Show  how  costs  of  production  determine  the  relative  limita- 
tion of  agricultural  supplies. 

37.  Try  to  find  illustrations  of  farm  products  which  are  examples 
of  constant  cost-goods;  of  diminishing  cost-goods;  of  increasing  cost- 
goods. 

38.  Which  of  these  classes  is  easiest  to  illustrate  from  agricultural 
experience  ?  Which  is  easiest  to  illustrate  from  industrial  experience  ? 
Is  there  any  reason  to  suppose  that  a  change  in  agricultural  organi- 
zation would  alter  these  conditions  ?  Relate  all  these  answers  to  the 
principle  of  diminishing  returns. 

39.  Is  there  such  a  thing  as  an  oversupply  of  farm  products 
(a)  from  the  standpoint  of  the  consumer  ?  (b)  from  the  standpoint  of 
the  farmer? 

40.  How  did  it  happen  that  farmers  supplied  grain  and  cattle  at 
such  low  figures  as  existed  in  the  late  eighties  and  early  nineties? 
Can  you  cite  any  region  or  line  of  production  in  which  they  are  doing 
the  same  thing  now  ?    For  the  same  reason  ? 

41.  Does  the  mere  fact  that  the  per  capita  production  of  food 
products  is  as  large  today  as  it  was  at  sometime  in  the  past  indicate 


VALUE  AND  PRICE  AS  RELATED  TO  FARM  PRODUCTS     35 

that  prices  today  either  are  or  should  be  on  the  same  level  that  they 
were  then  ?     Why  ? 

42.  What  bearing,  if  any,  does  the  tariff  have  upon  supplies  of 
farm  products  in  American  markets  ? 

43.  Butter  is  selling  wholesale  at  27  cents  per  pound  with  a  steady 
market.  Then  the  government  warehouse  report  appears,  showing 
10,000,000  pounds  of  butter  less  in  storage  than  there  was  a  year  ago 
at  this  date.  The  price  jumps  up  three  cents  within  an  hour.  Explain 
the  meaning  of  this  advance  and  each  step  in  the  process  by  which  it 
is  brought  about.     Is  it  justifiable  ? 

44.  Is  it  conceivable  that  all  the  farmers  producing  a  certain  com- 
modity might  sell  their  product  for  less  than  some  consumers  would 
pay  for  this  total  output  ?  How  would  it  be  possible  for  the  farmers 
to  make  sure  that  they  were  securing  the  maximum  amount  the 
public  was  able  and  willing  to  pay  ?  Is  this  the  result  we  should  aim 
to  secure?  How  about  the  consumer's  situation  and  the  future  of 
the  agricultural  industry  ? 

45.  Do  farmers  by  having  control  of  supplies  have  a  potential 
control  of  prices?  Are  there  any  limitations  upon  the  results  they 
can  accomplish  through  the  exercise  of  this  power  ? 

46.  What  difficulties  of  organization  and  administration  would 
confront  the  farmers  of  a  given  section  in  attempting  to  get  together 
to  control  the  market  by  (a)  holding  their  product  for  a  certain  price  ? 
(b)  by  limiting  acreage  in  order  to  induce  scarcity  prices  ?  Illustrate 
with  reference  to  tobacco,  milk,  citrus  fruits,  apples,  wheat,  and  cot- 
ton.    Give  reasons  in  each  case. 

Compare  with  the  possibilities  of  industrial  control  in  the  case  of 
anthracite  coal,  petroleum,  packing-house  products,  sugar,  and  farm 
implements. 

47.  May  farmers  organize  to  control  prices  without  incurring  the 
penalities  of  our  anti-trust  laws  ?     Should  they  ? 

48.  If  you  had  control  of  the  supply  of  a  certain  commodity,  what 
principles  would  you  follow  in  deciding  upon  the  monopoly  price 
which  you  would  exact  from  buyers  ? 

49.  What  is  meant  by  "  valorization  "  ?  What  functions,  besides 
merely  naming  a  price,  would  the  government  have  to  undertake  if  it 
attempted  to  valorize  a  given  farm  product  ? 

50.  Is  there  a  difference  in  purpose  in  case  the  government  names 
a  maximum  price  ?  a  minimum  price  ?  What  difficulties  of  adminis- 
tration would  there  be  in  these  cases?  From  whom  would  objec- 
tions come  to  either  of  these  policies  ?  Can  you  suggest  any  other 
means  by  which  the  government  might  better  accomplish  the  same 
result  ? 


36  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

51.  What  was  done  to  adjust  cotton  values  in  the  fall  of  1914? 
What  part  did  the  government  play  in  this  ?  What  part  did  private 
agencies  play  ? 

52.  Does  the  establishing  of  conditions  of  free  and  open  compe- 
tition effect  valorization  upon  a  natural  basis?  What  is  needed  to 
insure  such  a  competitive  condition  ? 

53.  What  is  the  process  of  cornering  a  market  ?  What  limitations 
are  there  upon  the  possibilities  of  doing  so?  What  markets  have 
actually  been  cornered  ? 

54.  Can  the  farmer  prevent  the  cornering  of  the  market? 
Always  ? 

55.  Are  there  many  small  markets  within  the  larger  market 
process  ?  What  do  we  mean  by  the  cotton  market,  the  wheat  market, 
or  the  egg  market  ? 

56.  Does  the  world-market  for  cotton  determine  the  price  which 
the  local  buyer  pays  ?  Does  the  local  buyer's  price  have  any  influence 
upon  Liverpool  conditions  ? 

57.  What  part  do  dealers  play  in  the  making  of  prices?  What 
is  the  "mechanism  of  the  market"  and  what  work  does  it  perform? 

58.  What  does  it  mean  to  say  that  prices  in  a  certain  city  are 
"out  of  line  with  the  general  market"  ? 

59.  What  is  your  idea  of  natural  value  ?   of  normal  price  ? 

60.  Do  natural  values  change  from  year  to  year  ?  Is  the  normal 
price  of  beef  in  this  country  rising  ?  Does  normal  price  depend  upon 
cost  of  production  ?  Whose  cost,  where  some  produce  at  lower  costs 
than  others  ? 

61.  What  does  the  wholesale  grain  or  cotton  or  butter  dealer  mean 
when  he  says  that  he  considers  prices  above  or  below  normal  for  this 
year  or  this  season  or  this  particular  moment  ?  Does  he  have  costs 
of  production  in  mind  ? 

62.  In  the  case  of  staple  crops  would  it  be  possible  around  harvest 
time  to  compute  what  should  be  the  normal  price  adjustment  for  that 
season  ?    Do  farmers  and  traders  do  this  ? 

63.  Is  there  a  normal  price  for  perishables  ? 

64.  Can  the  dealer  in  farm  products  set  aside  the  laws  of  supply 
and  demand  ?  Can  he  take  advantage  of  their  operation  ?  Can  he 
shape  them  to  his  purpose? 

PROBLEMS 

1.  The  preamble  to  some  resolutions  of  a  certain  "Taxpayers' 
Club"  in  August,  1914,  read  as  follows:  "Whereas,  We  note  with 
alarm  that  the  price  of  food  products  has  risen  far  beyond  that  called 
for  by  the  laws  of  supply  and  demand;  and  Whereas,  This  body 
believes  that  this  bad  practice  can  and  should  be  stopped,  and  the 


VALUE  AND  PRICE  AS  RELATED  TO  FARM  PRODUCTS     37 

persons  found  guilty  of  such  practices  punished/'  etc.  Do  you  believe 
that  the  first  of  these  propositions  is  borne  out  by  the  facts  of  war 
prices  in  the  United  States  ?  Do  you  think  the  Taxpayers'  Club  had 
adequate  information  upon  which  to  base  its  action?  Upon  what 
data  do  you  base  your  own  conclusion  ? 

2.  Do  you  agree  with  the  second  proposition  of  the  foregoing  pre- 
amble ?  Just  what  practices  should  be  stopped  ?  By  what  means  ? 
Upon  what  grounds  would  judicial  or  executive  officers  decide  when 
a  price  was  natural  and  right  and  when  it  was  artificial  and  wicked  ? 
Is  the  situation  analogous  to  public  utility  rate-making  ?  Should  we 
look  forward  to  government  regulation  of  food  prices  after  the  war  ? 
Would  regulation  of  methods  be  better  than  regulation  of  prices  ? 

3.  "The  doctor  goes  out  to  see  a  patient  and  he  knows  what  he 
is  going  to  get  for  that  service.  The  lawyer  knows  what  he  is  going  to 
get  for  trying  a  case.  The  banker  fixes  his  rate  of  interest.  The  bus- 
iness man  figures  up  his  expenses  and  adds  in  the  per  cent  that  he 
wants  for  his  profit.  He  knows  what  he  is  going  to  get.  Everybody, 
with  the  exception  of  the  farmer,  has  some  way  to  protect  himself  on 
his  investment.  If  we  raise  a  bushel  of  corn  that  costs  us  fifty  cents,  we 
don't  know  that  we  are  going  to  get  a  fair  remunerative  price  for  our 
labor  and  our  product.  If  we  raise  one  dollar's  worth  of  stuff,  we 
should  get  one  dollar  for  it  and  a  legitimate  profit  over  and  above 
that."  Is  the  first  part  of  this  a  correct  statement  of  facts  ?  Is  the 
latter  part  sound  economic  philosophy?  What  is  "a  dollar's  worth 
of  stuff"  ?  Could  the  world  be  run  on  a  plan  of  guaranteeing  every 
man  his  costs  of  production  ? 

4.  Can  farmers  control  the  price  situation  through  the  increase  or 
decrease  of  production  as  flexibly  as  can  the  manufacturer  ?  To  what 
extent  can  they  exert  such  control  ?  Upon  what  consideration  is  the 
acreage  in  a  given  crop  determined  today?  Would  a  rational  eco- 
nomic basis  of  determining  such  acreage  be  possible?  Would  a 
rather  large  " factor  of  safety"  be  necessary?  Why?  Examine  the 
figures  for  acreage  and  price  of  farm  products  as  given  in  the  Yearbook 
of  the  United  States  Department  of  Agriculture  to  see  whether  it 
seems  that  farmers  govern  their  operations  in  such  a  way  as  to  get 
the  benefit  of  accurately  meeting  market  needs.  The  figures  for 
potatoes  are  perhaps  the  best  to  study.  The  accompanying  chart 
(Fig.  1)  shows  them  graphically.  Does  the  acreage  of  a  given  year 
appear  to  be  controlled  by  the  price  of  the  preceding  year — i.e.,  the 
acreage  being  reduced  after  a  low  price  and  increased  after  a  high 
price  ?  Is  this  change  of  such  an  amount  as  to  effect  a  readjustment 
and  balance  or  to  throw  matters  out  of  balance  in  the  opposite  direc- 
tion? Is  the  situation  more  or  less  extreme  in  the  case  of  crops 
which  take  many  years  to  come  to  bearing,  such  as  fruit  trees  ? 


38 


OUTLINES  OF  AGRICULTURAL  ECONOMICS 


5.  Fig.  2  presents  a  profit-and-loss  chart  prepared  by  Wallace's 
Farmer  after  the  plan  of  the  Babson  charts  of  general  business  con- 
ditions. "As  an  average  of  the  last  ten  years,  in  April,  butter  sold 
at  Elgin  for  27.68  cents  per  pound,  while  corn  was  selling  for  61 .1 
cents  per  bushel.  It  took,  therefore,  the  value  of  .4528  of  a  bushel  of 
corn  to  equal  the  value  of  a  pound  of  butter.  But  during  April,  19 16, 
butter  sold  at  Elgin  for  34  cents,  and  No.  2  corn  in  Chicago  for  76 
cents.     Butter  therefore  sold  for  .41  of  a  cent  less  than  the  price  of 


Fig.  i  . — Prices  and  acreage  of  potatoes 


corn  would  indicate.  In  May,  butter  has  sold  on  the  average  for 
.3871  of  the  price  of  No.  2  corn  per  bushel  in  Chicago."  In  Novem- 
ber, 1916,  they  wrote,  "The  long-delayed  gain  area  H  seems  farther 
off  than  ever.  The  price  of  corn  has  increased  so  much  faster  than 
butter  that  the  loss  per  pound  for  October  reached  a  little  over  7  cents. 
It  begins  to  look  as  though  the  rather  numerous  dairy  cattle  sales 
which  have  taken  place  in  certain  localities  were  justified."  In 
February,  191 7,  they  add:  "The  slough  of  despond  is  becoming 
deeper.  Consumers'  boycott  leagues  and  oleomargarine  substitution 
have  held  down  the  prices  of  butter.    The  ten-year  corn-butter  ratio 


40 


OUTLINES  OF  AGRICULTURAL  ECONOMICS 


for  January  is  .5296  of  a  bushel  of  corn  to  a  pound  of  butter.  This 
year,  with  98j-cent  corn,  the  price  of  butter  should  be  52.17  cents, 
as  compared  with  the  actual  price  of  37.5  cents.  A  loss  of  14.67 
cents  is  the  greatest  of  any  time  in  the  past  twelve  years.  After  more 
than  three  years  of  solid  loss,  it  surely  seems  that  we  should  emerge 
into  Gain  Area  H. 

"What  is  the  trouble  ?  Have  the  dairy  enthusiasts  induced  too 
many  people  to  milk  cows  ?  If  so,  the  present  grief  period  should 
thin  out  the  ranks  sufficiently  so  that  price  conditions  will  eventually 
be  more  favorable."    Do  you  believe  that  some  such  methods  of 


Pttcf/vzzer  or  ror/4£ 


p/p/c^s  avi/r  or 

§    1 


\     &&JZO 


#&&o 


? 


#&5/\ 


&20 


I 


Fig.  3 


studying  the  farm  business  statistically  may  be  developed  to  the  point 
where  farmers  can  make  their  efforts  as  suppliers  fit  profitably  into 
the  demand  schedules  of  consumers?  Are  other  lines  of  business 
using  such  methods  of  forecasting  their  future  policies  ? 

6.  Do  you  not  ordinarily  expect  that  a  small  supply  will  be  accom- 
panied by  a  high  price  and  large  supply  by  low  price  ?  How  then  do 
you  explain  the  fact  that  "an  examination  of  the  market  quotations 
for  the  bulk  of  beef  cattle  sales  at  Chicago  by  days  of  the  week  indi- 
cates that  quotations  rule  highest  on  the  days  of  largest  receipts "? 
Average  figures  for  a  two-year  period  are  shown  in  the  accompanying 
chart  (Fig.  3). 


VALUE  AND  PRICE  AS  RELATED  TO  FARM  PRODUCTS     41 

7.  There  are  seventeen  cars  of  Imperial  Valley  cantaloupes  in  the 
New  York  market  on  a  certain  raw  and  chilly  Saturday  morning  in 
early  June.  What  part  does  the  cost  of  producing  these  melons  have 
in  the  making  of  the  price  at  which  they  sell  ?  Does  the  cost  of  pro- 
ducing cantaloupes  in  the  Imperial  Valley  have  a  part  in  determining 
prices  in  New  York  on  the  following  Thursday?  How  about  this 
cost  of  production  and  the  average  price  of  cantaloupes  during  the 
next  year's  shipping  season  ? 

8.  "The  services  performed  in  the  marketing  process  can  be 
classified  under  one  of  the  following  heads:  (1)  assembling;  (2)  stor- 
ing; (3)  assumption  of  risk;  (4)  financing;  (5)  rearrangement; 
(6)  selling;  and  (7)  transportation."  Which  of  these  functions  are 
to  be  regarded  as  properly  a  part  of  the  work  of  the  agricultural  pro- 
ducer? Under  what  conditions  and  to  what  extent  should  some  of 
them  be  turned  over  to  other  agencies  ?    Why  ? 

ADDITIONAL  REFERENCES 

Seligman,  Principles  of  Economics,  chaps,  xii-xvi. 

Seager,  Principles  of  Economics,  chap.  vii. 

Ely,  Outlines  of  Economics,  chaps,  x  and  xi. 

Carver,  Distribution  of  Wealth,  chap.  i. 

Weld,  The  Marketing  of  Farm  Products,  chaps,  xii  and  xv. 

Taylor,  "The  Prices  of  Farm  Products,"  Bulletin  20Q,  Wisconsin  Experi- 
ment Station. 

Nourse,  The  Chicago  Produce  Market  (in  press),  chaps,  vii  and  viii. 

JCerr  and  Weld,  "  Prices  of  Wheat  to  Producers  in  Kansas,"  etc.,  H.R. 
Document  No.  1271,  63d  Congress,  3d  session. 

Warren,  "  Crop  Yields  and  Prices  and  Our  Future  Food  Supply,"  Bulletin 
341,  Cornell  Experiment  Station. 

Davenport,  "The  Relation  between  Yields  and  Prices,"  Circular  No.  177, 
Illinois  Experiment  Station. 

(See  also  references  at  end  of  chapter  following.) 

TOPICS  EOR  SPECIAL  PAPERS 

Economic  Effects  of  the  Effort  to  Educate  the  Public's  Demand  for  Farm 

Products. 
The  Irrational  Character  of  Supply. 
Price  as  an  Adjusting  Force. 

Can  Agricultural  Producers  Organize  for  Price  Control? 
The  Effects  of  a  Boycott  upon  Prices. 
Is  the  Farmer's  Fear  of  Overproduction  Justified  ? 
The  Movement  of  Farm  Prices  Since  the  Civil  War   (or  some  shorter 

period)  with  Analysis  of  the  Reasons  Therefor. 
The  Relation  of  Market  Organization  to  Prices. 


IX.     MARKET  METHODS  AND  PROBLEMS 

QUESTIONS 

i.  What  features  distinguish  the  "exchange"  from  other  forms  of 
market  organization  ?    Is  there  a  hard-and-fast  line  of  demarcation  ? 

2.  Make  a  list  of  as  many  lines  of  farm  products  as  you  can  find 
handled  by  the  exchange  method.  Are  new  commodities  being  added 
to  the  list  from  time  to  time  ?  What  characteristics  must  such  com- 
modities possess  ? 

3.  Explain  the  difference  between  "spot"  and  "future"  transac- 
tions. Why  is  future  trading  carried  on?  Did  you  ever  hear  of 
future  sales  of  eggs  ?  of  apples  ?  of  livestock  ?  Explain  why  or  why 
not  in  each  case. 

4.  How  does  a  "bucket  shop"  differ  from  a  "legitimate"  ex- 
change ? 

5.  What  practices  does  the  regular  produce  exchange  forbid? 
Why?     What  power  does  it  have  with  which  to  enforce  its  rules? 

6.  What  is  a  warehouse  receipt?  Explain  the  system  under 
which  they  are  issued  and  the  advantages  resulting  from  their  use. 

7.  What  arguments  are  brought  forward  to  prove  that  exchange 
dealing  exerts  a  steadying  influence  on  prices  ? 

8.  Would  it  be  correct  to  say  that  the  grain  exchange  is  a  market 
mechanism  which  operates  to  keep  the  markets  in  different  cities  in 
line  with  one  another  ?  Explain  the  method  by  which  this  result  is 
accomplished. 

9.  What  is  a  basis  contract?  Suppose  there  were  an  abnormal 
crop  year,  in  which  practically  all  the  corn  was  of  very  inferior 
grade;  would  the  fixed  differences  of  price  provided  by  the  Chicago 
Board  of  Trade  work  equitably  to  all  parties  ?  What  results  might 
follow  ? 

10.  Can  you  suggest  any  other  method  by  which  basis  contracts 
might  be  settled  ?  What  does  the  United  States  Cotton  Futures  act. 
say  on  this  subject  ? 

n.  Is  it  desirable  to  have  national  grades  for  staple  farm  pro- 
ducts ?  Why  ?  Do  we  have  them  at  the  present  time  ?  How  are 
grades  of  apples,  butter,  and  citrous  fruit  established  ? 

12.  What  is  a  hedging  contract  and  how  is  it  used?  Show  how 
the  farmer  could  protect  his  business  by  hedging. 

13.  What  is  a  "bear"  and  why?  a  "bull"? 

14.  Would  a  bear  raid  on  the  market  be  harmful  to  the  producer  ? 
Will  the  appearance  of  a  strong  bull  interest  result  in  higher  price* 
to  consumers  ? 

42 


MARKET  METHODS  AND  PROBLEMS  43 

15.  Draw  up  as  complete  a  list  as  possible  of  the  farm  products 
which  are  handled  through  auctions.  What  characteristics  make 
them  suitable  for  auction  dealing  ?  Mention  several  that  are  entirely 
incapable  of  being  handled  at  auction.     Why? 

16.  Does  the  auction  system  reduce  the  number  of  middlemen  who 
handle  the  goods  between  producer  and  consumer  ?  Does  it  add  one 
more  link  to  the  chain  ? 

17.  What  effect  does  it  have  upon  the  cost  of  selling?  upon  pro- 
ducers' price  returns  ?    upon  consumers'  prices  ? 

18.  Take  the  auction  method  as  applied  to  the  commodity  in 
which  you  are  most  interested.  What  is  the  character  of  the  demand 
brought  together  in  the  auction-room?  Does  the  auction  reach 
demand  as  fully  as  do  private  dealers  ?  Does  it  stimulate  demand  as 
effectively  as  the  private  dealer  ? 

19.  Point  out  the  similarities  and  differences  in  the  organization 
and  methods  of  the  stockyards  and  the  cotton  or  grain  exchange. 

20.  Does  the  stockyards  system  make  it  easy  or  difficult  for  large 
buyers  to  manipulate  prices  to  their  own  advantage  ? 

21.  Explain  the  method  of  the  "call  board."  Does  this  method 
of  dealing  bring  about  full  and  free  competition  among  buyers  ? 

22.  Does  the  name  "broker"  as  used  in  the  fruit  and  vegetable 
trade  carry  the  same  significance  as  when  applied  to  the  broker  in  the 
grain  or  cotton  exchange  ?  the  stock  broker  ?  the  real  estate  broker  ? 
What  is  a  broker  ? 

23.  Point  out  the  distinction  between  car-lot  wholesaler,  commis- 
sion man,  jobber,  and  broker.  Are  they  generally  separate  indi- 
viduals ? 

24.  What  is  a  speculator  ?  Describe  the  process  of  speculation. 
Do  all  the  classes  of  middlemen  mentioned  in  the  previous  question 
engage  in  speculation  ?     May  persons  outside  the  trade  do  so  ? 

25.  Could  some  of  these  middlemen  be  eliminated  from  the  mar- 
keting process  ?  Is  the  work  they  do  superfluous  ?  Could  someone 
else  do  their  work  more  economically  ?  Back  up  all  your  statements 
with  adequate  evidence. 

26.  What  is  the  relative  charge  made  by  the  wholesaler,  the 
jobber,  and  the  retailer  of  oranges?  Which  does  the  most  work? 
Explain  the  services  of  each.  Does  each  suffer  the  same  amount  of 
loss  or  deterioration  of  goods  handled?  Does  this  enter  into  the 
consumer's  price  ? 

27.  Are  the  middlemen  who  handle  farm  products  specialists? 
What  is  the  jobber's  specialty?  What  is  the  country  shipper's 
specialty  ?  Can  you  cite  any  new  form  of  specialization  which  has 
appeared  in  the  handling  of  some  commodity  with  which  you  are 
familiar  ? 


44  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

28.  Is  parcel-post  marketing  designed  to  lower  consumers'  prices  ? 
raise  producers'  prices?  Can  it  do  both?  Point  out  the  principal 
difficulties  from  (a)  consumer's  point  of  view,  (b)  producer's  point  of 
view. 

29.  Would  there  be  an  actual  social  saving  in  marketing  by  parcel 
post — i.e.,  would  there  be  less  labor  and  material  used  up  in  the 
process?  Or  would  there  simply  be  a  redistribution  of  effort  and 
reward  ? 

30.  Get  some  local  transportation  rates  and  costs  of  packing  for 
parcel  post  and  for  regular  shipment.  Figure  how  large  a  package  of 
eggs,  butter,  vegetables,  or  the  like  one  would  have  to  get  in  order  to 
make  a  saving  of  fifty  cents.  How  much  effort  on  the  buyer's  part 
would  this  transaction  involve  ?     Would  it  be  worth  while  ? 

31.  Is  parcel-post  marketing  a  means  of  saving  some  goods  which 
would  otherwise  go  to  waste  ?  Is  it  a  means  of  giving  city  dwellers 
perishable  products  of  better  quality  than  can  be  secured  under  ordi- 
nary conditions  ? 

32.  What  advantages  are  possessed  by  express  companies  for 
developing  and  carrying  on  direct  marketing  operations  which  are 
not  enjoyed  by  the  post-office  ? 

7,3.  Are  public  markets  an  institution  of  great  age  or  of  recent 
appearance?  Why  is  there  special  interest  in  public  food  markets 
today  ? 

34.  Does  retail  selling  in  public  markets  stabilize  prices  in  accord- 
ance with  actual  ratios  of  demand  and  supply  ?  Does  it  avoid  waste 
or  deterioration  of  the  goods  ?  Does  it  effect  greatest  labor  economy 
in  selling  ?    other  economies  ? 

35.  Discuss  the  principal  abuses  in  the  grain  business,  the  live- 
stock business,  or  the  shipping  of  fruit  and  truck  crops  which  led  to 
the  movement  for  co-operative  marketing  associations.  Has  co- 
operation eliminated  them  ? 

36.  What  are  the  principal  difficulties  in  the  way  of  successful 
co-operative  selling  organizations  ?  Are  these  due  to  (a)  the  nature 
of  the  commodity  ?  (A)  the  nature  of  the  producer  ?  (c)  the  nature  of 
the  market? 

37.  What  middlemen  does  the  co-operative  shipping  association 
eliminate  ?  Does  it  do  the  same  work  with  greater  economy  or  does 
it  get  some  easy  profits  that  formerly  went  to  the  local  buyer  and 
shipper  ? 

38.  Does  co-operative  organization  of  growers  oblige  city  whole- 
sale buyers  to  pay  more  than  they  otherwise  would  for  their  supplies  ? 
Does  it  result  in  higher  prices  to  consumers  ? 


MARKET  METHODS  AND  PROBLEMS  45 

39.  Should  a  co-operative  association  have  capital  stock  ?    Why  ? 

40.  What  are  the  principal  methods  of  arranging  the  control  of 
the  co-operative  organization  ?  Should  every  member  have  the  same 
voting  power  ?     Why  or  why  not  ? 

41.  Have  co-operators  succeeded  in  building  up  a  large  enough 
organization  to  control  the  whole  process  of  selling  any  product  in 
distant  markets  to  (a)  jobbers  ?  (b)  retailers  ?  (c)  consumers  ?  Is  one 
of  these  their  goal  ? 

42.  Show  the  difference  between  the  marketing  ideas  of  the  Cali- 
fornia legislature  and  those  of  the  market-director.  With  which  do 
you  agree  ?    Why  ? 

43.  Would  it  be  feasible  for  state  authorities  to  establish  a 
complete  system  of  inspection  and  grading  and  then  market  the 
product  under  a  state  brand?  What  economic  benefits  would 
result  ? 

44.  What  gains  would  result  from  state- wide  affiliation  of  pro- 
ducers in  a  great  shipping  organization?  Would  it  have  to  be 
limited  to  a  single  commodity?  What  other  limitations  or  diffi- 
culties ? 

45.  Have  you  a  state  department  or  bureau  of  markets  in  your 
state  ?    What  is  it  doing  or  has  it  done  ? 

46.  Give  an  outline  of  the  activities  of  the  Office  of  Markets  of 
the  United  States  Department  of  Agriculture.  Are  they  following 
up  the  lines  of  greatest  benefit  to  the  public  ?  What  other  lines  of 
work  would  you  suggest  ? 

47.  Explain  the  market  information  service  of  the  Office  of 
Markets.  To  whom  is  this  information  available  ?  What  help  is  it 
to  (a)  the  grower  ?  (b)  the  shipper  ?  (c)  the  buyer  ? 

48.  Give  a  brief  explanation  of  the  Landwirtschaftsrat  system. 
How  would  this  organization  compare  with  American  conditions  if 
each  state  had  a  state  market  department  affiliated  with  the  Office  of 
Markets  of  the  United  States  Department  of  Agriculture  ? 

49.  Would  such  a  national  plan  of  market  distribution  be  equally 
applicable  to  the  marketing  of  perishables  and  of  staple  products? 
Why? 

50.  Do  we  have  any  kind  of  market  organization  today  which  is 
nation-wide  in  its  scope  ?  Try  to  get  an  illustration  of  one  which  is 
co-operative  in  character  and  of  one  which  is  a  private  company  or 
corporation. 

51.  Do  the  plans  of  food  control  during  war  times  form  a  workable 
or  desirable  pattern  according  to  which  we  should  organize  the  dis- 
tribution of  agricultural  products  after  the  war  ? 


46  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

PROBLEMS 

i.  "Distribution  of  agricultural  products  in  the  United  States 
has  become  largely  identified  with  a  speculative  class  of  trading  capi- 
talists, because  it  has  been  found  best  for  the  producing  and  the  con- 
suming interests  of  the  community  that  the  risks  of  distribution  should 
be  localized  in  a  separate  commercial  class  whose  members  are  in  a 
position  to  inform  themselves  as  to  all  the  factors,  past,  present,  and 
prospective,  affecting  the  future  course  of  prices.  If  the  risks  fell 
upon  the  farmer,  it  would  increase  materially  the  risks  of  capital 
required,  thus  raise  the  rate  of  interest  he  would  have  to  pay,  increase 
the  cost  of  production,  and  consequently  tend  to  reduce  consumption 
by  rise  of  price  to  consumers/ '  Is  this  statement  correct?  Does  it 
constitute  a  defense  of  the  middleman  ? 

2.  "This  bill  [Cotton  Futures  act]  legalizes  and  licenses  gambling 
in  cotton  futures,  which  we  promised  to  suppress.  Do  you  dare  go 
to  the  raiser  of  cotton — the  farmer  who  makes  from  i  to  20  bales  of 
cotton  a  year — and  say,  'I  voted  to  legalize  gambling  on  the  New 
York  Cotton  Exchange.  I  voted  for  a  bill  that  will  increase  the 
number  of  "phantom"  bales  dealt  in'?  Such  gambling  in  futures 
increases  the  supply  by  the  addition  of  the  paper  supply  sold  by  the 
'  short '  speculators  who  are  bearing  the  market,  a  practice  which  it  is 
admitted  depresses  the  price  of  cotton."  Do  you  admit  all  these 
statements  ?  Is  any  factor  overlooked  ?  Should  all  exchange  trans- 
actions be  limited  to  spot  dealings  ?     Give  full  reasoning. 

3.  Is  speculation  the  same  thing  as  gambling?  "The  American 
system  of  distributing  farm  products  is  essentially  a  speculative  system 
from  beginning  to  end — speculative  in  the  sense  that  after  the  products 
pass  out  of  the  producers'  hands  until  they  pass  into  the  consumers' 
control  there  is  not  a  moment  nor  a  stage  in  the  distributive  move- 
ment during  which  the  one  who  has  legal  control  of  the  goods  does 
not  run  the  risk  of  a  rise  or  fall  in  the  value  of  the  property."  Show 
clearly  where  the  line  is  to  be  drawn  between  speculative  operations 
which  are  beneficial  and  those  which  are  harmful. 

4.  Show  the  relation  and  the  distinction  between  speculation  and 
the  manipulation  of  prices.  "There  is  need  of  the  greatest  care  in 
reasoning  upon  the  complex  play  of  cause  and  effect  in  the  emergence 
of  prices.  Shall  we  say  next  winter  that  eggs  are  high  because  the 
men  who  store  eggs  get  together  and  boom  the  price?  Or  shall  we 
say  they  are  high  because  exports  from  Russia  and  Denmark  have 
been  cut  off  and  some  of  the  home  supply  called  for  by  South 
American  markets,  and  be  glad  that  the  foresight  of  dealers  led 
them  to  accumulate  so  large  a  stock  as  they  did  last  April  ?  "  Answer 
this  riddle. 


MARKET  METHODS  AND  PROBLEMS 


47 


5.  A  certain  auction  company  advertises:   "In  case  of  ' trouble' 

in  or  near ,  divert  your  cars  to  the Auction  Company. 

Any  cars  of  perishable  goods  arriving  in  damaged  condition  should 
be  immediately  turned  over  to  the Auction  Company  for  dis- 
position. Holding  perishables  indefinitely  means  deterioration,  car 
service,  demurrage,  waste  of  time  and  money."  Why  should  these 
particular  cases  be  cited  ?  Is  this  the  only  field  of  auction  selling  ? 
Is  it  the  most  important  ? 

6.  "New  Yorkers  today  are  buying  butter  from  Minnesota,  eggs 
from  Iowa,  cantaloupes  from  Arizona,  and  apples  from  Oregon. 
Every  one  of  these  articles  can  be  raised  in  our  climate  and  the  present 
enormous  cost  of  long-distance  marketing  saved."  Is  this  argument 
good?  Can  you  show  how  the  costs  of  marketing  from  a  distant 
point  may  be  less  than  those  from  the  near-by  point  ?  What  other 
factors  may  influence  the  situation  ? 

7.  "  Whenever  it  is  possible  to  make  human  nature  over,  eliminate 
greed  from  one  man,  sloth  from  another,  dishonesty  from  another, 
and  above  all  graft  from  the  promoters,  then  co-operation  in  the 
growing  and  marketing  of  produce  will  be  a  success  and  not  before." 
Suggest  some  ordinary  business  devices  now  in  use  by  co-operative 
organizations  that  have  welded  ordinary  imperfect  mortals  into  ef- 
fective working  systems.  Have  the  courts  upheld  the  right  of  the 
association  to  demand  that  members  live  up  to  their  agreements  ? 

8.  There  is  much  talk  in  certain  quarters  about  the  "scientific 
marketing  of  farm  products."  Is  there  a  science  of  marketing? 
What  is  meant  by  the  expression  "a  scientific  approach  to  the  prob- 
lem of  marketing"  ?  The  following  chart  has  been  used  to  illustrate 
unscientific  marketing.     What  was  wrong  ? 

CHART  SHOWING  MOVEMENT  OF  BARTLETT  PEARS  FOR  ONE 
WEEK,  IN  THE  CITY  OF  NEW  YORK 


Day 

Date 

Cars 

Boxes 

Average 

Monday 

July  24 
July  25 
July  26 
July  27 
July  28 

52 

27 

23 
28 

31 

27,100 

14,045 
HJ65 
14,550 
16,195 

$2.04 

Tuesday 

2  .  21 

Wednesday 

Thursday 

2.48 
2.48 
2.57 

Friday 

9.  The  Industrial  Commission  (1900)  said:  "In  the  distribution 
of  livestock,  of  cotton,  grain,  tobacco,  and  wool,  the  main  tendency 
is  to  eliminate  the  more  expensive  middleman.  The  telegraph  and 
mail  bring  to  the  cotton  and  grain  producers  the  prices  of  the  world's 
markets  day  by  day.    The  shipper  simply  ascertains  by  what  means 


48  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

the  transfer  from  producer  to  consumer  can  be  effected  most  econom- 
ically. To  err  is  to  eliminate  himself.  An  attempt  to  impose  even 
a  trirlingly  small  excess  of  charges  on  cotton  or  grain  at  one  distribu- 
tion point  will  be  taken  advantage  of  by  competing  points.' '  Can 
you  illustrate  the  operation  of  such  a  process  of  elimination?  Has 
the  same  movement  gone  on  since  1900  ?  Is  it  apparent  in  other  prod- 
ucts than  those  mentioned,  such  as  fruit,  truck,  and  dairy  products  ? 

10.  "  Two  years  ago  tomatoes  were  scarce  and  high.  This  enabled 
the  co-operative  association  to  sell  its  product,  even  the  inferior  stock, 
at  high  prices.  The  buyers  were  on  the  ground  grabbing  for  the  cars. 
The  association  took  all  the  credit,  claiming  they  forced  the  wicked 
buyers  to  bid  over  each  other.  News  of  the  great  profits  went  round 
and  this  year  everybody  had  tomatoes,  oodles  of  them.  As  a  result, 
the  association  blew  up.  Buyers  would  not  even  bid,  but  asked  for 
goods  on  consignment.  Acres  of  fine  tomatoes  went  to  waste.  The 
law  of  supply  and  demand  stepped  in  and  changed  the  order  as  it 
always  has  and  always  will."  Does  this  point  to  a  limitation  and  a 
danger  which  co-operative  associations  must  face?  Explain.  How 
can  it  be  met  ? 

n.  "A  correspondent  points  out  that  two  articles  of  food  are 
practically  always  to  be  found  in  every  part  of  the  United  States,  and 
almost  always  at  a  low  price  when  the  distance  which  they  are  trans- 
ported is  taken  into  account.  The  two  articles  are  oranges  and 
bananas.  The  price  of  the  latter,  in  fact,  is  almost  stable  and  uniform 
all  over  the  country  year  in  and  year  out,  although  bananas  are  a 
perishable  product  and  are  shipped  thousands  of  miles.  The  market- 
ing of  oranges  and  bananas  is  extensively  organized — the  former  by 
co-operative  associations,  the  latter  by  a  trust.' '  Should  we  look  to 
organizations  like  the  United  Fruit  Company  to  reduce  marketing 
costs  in  the  future  ?    Have  the  meat-packers  reduced  costs  ? 

12.  "A  conspicuous  feature  of  the  American  grain  market  is  the 
existence  of  a  large  ' visible  supply'  during  the  greater  portion  of  the 
year."  Exchange  reports  from  day  to  day  record  the  increase  or 
decrease  of  this  visible  supply  and  make  comparisons  with  conditions 
of  previous  years.  Competitive  dealing  in  the  light  of  this  informa- 
tion tends  to  eliminate  large  profits  to  middlemen.  "On  the  other 
hand,  products  such  as  fruits  and  vegetables,  where  no  storable  supply 
exists,  because  of  their  perishable  nature,  have  shown  but  a  slow 
tendency  to  get  rid  of  the  more  expensive  methods  of  distribution." 
Explain  the  two  propositions  here  laid  down.  Can  you  show  that 
the  organization  of  the  produce  trade  today  is  such  as  to  make  pos- 
sible the  securing  of  fairly  reliable  information  as  to  the  visible  supply 
of  even  perishable  commodities  ?  Is  this  calculated  to  have  a  stabil- 
izing effect  upon  prices  ?    How  ? 


MARKET  METHODS  AND  PROBLEMS  49 

13.  A  prominent  railroad  official  estimates  the  following  annual 
losses  due  to  our  "loose  system  of  distribution": 

100,000  cars  of  fruit  and  vegetables  which  rot  on  the  ground 
for  lack  of  shipping  and  storage  facilities  and  knowledge 
of  receptive  markets,  at  $350  a  car $    35,00,0,000 

Loss  in  cornstalks,  rice,  flax,  and  other  grain  straw,  now 

burned 250,000,000 

Additional  amount  which  the  farmers  should  receive  if  by- 
co-operation  they  knew  when  and  where  to  sell  their 
products  to  best  advantage 1,500,000,000 

Total. $1,785,000,000 

Are  all  these  items  "losses"  or  "wastes"  in  an  absolute  or  only 
in  a  relative  sense  ?  If  all  could  be  eliminated  would  the  nation  be 
a  billion  and  three-quarters  richer  ?  Would  farmers  ?  In  case  you 
had  power  to  remedy  one  of  these  three  defects  each  year  for  three 
years,  in  what  order  would  you  go  at  them  ? 

ADDITIONAL  REFERENCES 

Brace,  Organized  Speculation. 

Powell,  Co-operation  in  Agriculture,  chaps,  vii  and  viii. 

Weld,  The  Marketing  of  Farm  Products. 

Huebner,  Agricultural  Commerce. 

Adams,  Marketing  Perishable  Farm  Products  (Columbia  Studies,  No.  170). 

Nourse,  The  Chicago  Produce  Market  (in  press). 

Wiest,  The  Butter  Industry  in  the  United  Stales,  chaps,  v-viii  (Columbia 
Studies,  No.  165). 

Hibbard  and  Hobson,  "The  Marketing  of  Wisconsin  Butter,"  Bulletin  270, 
Wisconsin  Experiment  Station. 

Industrial  Commission  (1900),  Distribution  and  Marketing  of  Farm  Products, 
Vol.  VI  of  the  Commission's  report. 

Bohannan  and  Campbell,  "A  Preliminary  Study  of  the  Marketing  of  Burley 
Tobacco  in  Central  Kentucky,"  Bulletin  202,  Kentucky  Experiment 
Station. 

More  and  Dorland,  "Commercial  Handling,  Grading,  and  Marketing  of 
Potatoes,"  Farmers'  Bulletin  753. 

Potts  and  Meyer,  "Marketing  Creamery  Butter,"  Bulletin  456,  U.S. 
Department  of  Agriculture. 

Schleussner  and  Kitchen,  "Marketing  and  Distribution  of  Western  Musk- 
melons  in  191 5,"  Bulletin  401,  U.S.  Department  of  Agriculture;  Bulle- 
tin 315  on  similar  subject. 

Bassett,  et  al.,  "Co-operative  Marketing  and  Financing  of  Marketing  Asso- 
ciations," Yearbook  of  the  U.S.  Department  of  Agriculture,  19 14;  "Public 
Markets,"  ibid. 

Sherman,  et  al.,  "Studies  of  Primary  Cotton  Market  Conditions  in  Okla- 
homa," Bulletin  36,  U.S.  Department  of  Agriculture. 


SO  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

McConnell  and  Carp,  "A  Study  of  Cotton  Market  Conditions  with  a  View 
to  Their  Improvement,"  Bulletin  476,  U.S.  Department  of  Agriculture; 
see  also  Bulletin  457. 

U.S.  Commissioner  of  Corporations,  Report  on  Cotton  Exchanges. 

,  Report  on  the  Beef  Industry. 

jr-,  Report  on  the  Tobacco  Industry. 

U.S.  Department  of  Labor,  "  Butter  Prices  from  Producer  to  Consumer," 
Bulletin  164,  Bureau  of  Labor  Statistics. 

"Sugar  Prices  from  Refiner  to  Consumer,"  Bulletin  121,  Bureau  of 


Labor  Statistics. 


TOPICS  FOR   SPECIAL  PAPERS 


An  almost  infinite  number  of  suitable  themes  will  occur  to  the  person 
who  examines  those  lines  of  marketing  with  which  he  is  most  closely 
in  touch.    A  few  others  may  be  mentioned: 

The  Good  and  Evil  of  Speculative  Trading. 

Anti-Option  Bills  and  the  Regulation  of  Future  Dealing. 

National  Grades  for  Farm  Products. 

The  Usefulness  and  Limitations  of  Auction  Selling. 

Methods  of  Handling  and  Selling  Tobacco,  Wool,  or  Other  Local  Product. 

Modern  Organization  of  the  Trade  in  Perishables. 

City  Marketing  Problems,  Public  Markets,  Parcel  Post,  etc. 

Achievements  and  Difficulties  of  Co-operative  Selling  Associations. 

How  Wide  Should  Be  the  Scope  of  the  Co-operative  Selling  System  ? 

The  Movement  toward  Federation  of  Local  Co-operative  Associations. 

The  Market  News  Service  of  the  Bureau  of  Markets. 

The  Market  Department  (or  regulations)  of (your  state). 

Market  Developments  of  the  Last  Three  Years  in  New  York. 

The  New  California  Legislation. 

Foreign  Trade  in  American  Farm  Products  (or  some  particular  article) . 


X.    TRANSPORTATION    AND    STORAGE    FACILITIES    AS 
FACTORS  IN  THE  MARKETING  OF  FARM  PRODUCTS 

QUESTIONS 

i.  Is  there  a  complete  analogy  between  the  railroad's  charging 
what  different  classes  of  traffic  will  bear  and  the  farmer's  incurring 
transportation  costs  proportionate  to  the  value  of  his  product  ? 

2.  Does  charging  according  to  value  of  service  and  according  to 
cost  of  service  produce  approximately  similar  rates  in  the  case  of 
railroad  traffic  ?    ocean  carriers  ? 

3.  Do  farmers  gauge  their  outlays  upon  road-building  in  accord- 
ance with  the  value  of  the  products  to  be  hauled  ? 

4.  Explain  the  principal  steps  by  which  the  exportation  of  agricul- 
tural products  of  the  Mississippi  was  made  practicable  and  profitable. 
What  effect  did  this  have  upon  prices  in  the  Middle  West  ?  in  Mas- 
sachusetts ?     in  England  ? 

5.  Explain  how  both  the  supply  and  the  demand  side  of  the  market 
for  cantaloupes  are  affected  by  the  development  of  cheap  refrigerated 
transportation  from  the  Far  West.  Do  low  railroad  rates  harm  or 
benefit  the  eastern  farmer  ? 

6.  What  would  be  the  effect  upon  city  milk  prices  if  our  railroads 
were  swept  out  of  existence  ?  What  effect  has  the  building  of  electric 
lines  had  on  milk  prices  ?     Explain  both  cases. 

7.  Would  the  additional  work  needed  to  take  proper  care  of  the 
eggs  on  the  average  Mississippi  Valley  farm  be  an  expenditure  of 
labor  under  conditions  of  diminishing  or  increasing  returns  ?  Might 
it  be  sometimes  one  and  sometimes  the  other  ?  Check  your  answer 
against  the  figures  in  Agricultural  Economics  on  p.  579  showing 
monthly  distribution  of  losses  from  bad  eggs. 

8.  Explain  the  method  of  buying  eggs  "loss  off"  and  its  effect 
upon  the  egg  business. 

9.  Is  the  local  creamery's  method  of  buying  milk  according  to 
butter-fat  test  and  selling  the  product  co-operatively  suited  to  the 
marketing  of  eggs  also  ?    Is  this  method  in  actual  use  ? 

10.  Does  every  improvement  in  the  transportation  system,  such 
as  quicker  service,  lower  rates,  or  better  refrigeration,  tend  to  move 
the  field  of  production  still  farther  from  the  consumer  ?  Is  this  result 
desirable  or  even  tolerable  ?    Explain. 

n.  Give  a  brief  account  of  the  method  by  which  cars  are  refriger- 
ated.    See  what  you  can  find  out  about  pre-cooling  methods. 

12.  How  do  you  explain  the  fact  that  the  average  wagon  haul  was 
shorter  in  191 5  than  it  was  in  1906  ?    How  much  shorter  was  it  ? 

51 


52  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

13.  Does  the  farmer  consciously  figure  the  cost  of  team  hauling 
as  a  factor  in  his  selling  price  ?  Is  the  indirect  effect  the  same  as  if 
he  did  ?     How  ? 

14.  Does  a  straight  road  make  the  cheapest  hauling  between  two 
points  ?  Is  the  actual  cost  of  hauling  upon  a  given  road  the  average 
of  the  cost  upon  its  several  parts  ?  the  cost  of  its  most  difficult  por- 
tion ?     Why  ? 

15.  Take  the  roads  of  some  farming  section  with  which  you  are 
familiar.  Assume  that  you  have  a  limited  amount  of  labor  and 
capital  to  expend  upon  them — say  $200  and  250  man-days  of  labor. 
Could  you  apply  this  with  largest  returns  by  (a)  scraping  and  side- 
ditching  present  roads?  (b)  by  resurfacing  with  gravel  or  crushed 
stone  ?  (c)  by  cutting  down  grades  ?  (d)  by  relocating-  the  road 
along  a  contour  line  ? 

16.  Explain  the  "red  ball"  or  similar  special  freight  service  for 
perishable  farm  products.  How  do  the  rates  of  speed  on  such  prefer- 
ence freight  compare  with  rates  on  ordinary  freight  ?  on  passenger 
service  ? 

17.  Go  to  your  local  freight  agent  and  find  out  how  charges  on 
the  different  classes  of  service  compare;  on  car-lot  and  less  than  car- 
lot  rates.     What  is  the  minimum  carload  ?     Is  this  the  maximum  ? 

18.  What  is  a  "passing  report"  and  what  purpose  does  it  serve? 

19.  What  is  the  "diversion"  privilege  and  how  is  it  used  in  the 
marketing  of  agricultural  products  ?    Explain  its  advantages. 

20.  Can  you  demonstrate  that  there  are  economic  gains  from  the 
granting  of  concentration  rates  which  justify  the  Interstate  Commerce 
Commission  in  compelling  the  railroads  to  grant  such  rate  conces- 
sions ? 

21.  Explain  the  purpose  and  method  of  storage-in- transit.  Does 
the  use  of  this  privilege  result  in  a  social  saving  or  merely  an  individual 
gain? 

22.  Is  car  shortage  in  the  United  States  a  matter  of  an  absolute 
scarcity  of  rolling  stock  or  of  a  relative  undersupply  of  certain  types 
of  cars  at  particular  times  and  places  ? 

23.  Is  the  car  supply  handled  in  such  a  way  as  to  give  it  maximum 
power  to  satisfy  shippers'  needs  ?  See  what  you  can  find  out  about 
the  methods  followed  by  the  railroads  to  supply  shippers'  needs. 

24.  Do  shippers  sometimes  interfere  with  the  efficient  utilization 
of  cars  ?    How  could  this  be  avoided  ? 

25.  How  has  the  problem  of  the  rapid  and  economical  handling  of 
products  at  the  railway  terminal  been  met  in  the  case  of  (a)  iron  ore  ? 
(b)  bulk  grains?  (c)  package  freight,  particularly  fruit,  vegetables, 
poultry,  and  dairy  products  ?  Is  the  loss  due  to  poor  facilities  greater 
or  less  in  the  last  case  than  in  the  other  two  ?    Is  it  more  difficult  to 


TRANSPORTATION  AND  STORAGE  53 

devise  adequate  methods  and  equipment  for  handling  this  class  of 
traffic  ?  Why  ?  Do  you  know  of  any  place  where  it  has  been  done 
satisfactorily  ? 

26.  What  is  demurrage  and  why  is  it  charged?  What  is  "free 
time"?    "reciprocal  demurrage"?     Look  up  "average"  agreements. 

27.  Are  food  products  injured  by  cold  storage  for  thirty  days? 
three  months  ?  nine  months  ?  Can  the  business  judgment  of  dealers 
be  relied  upon  to  keep  the  storage  period  down  to  safe  limits  ? 

28.  Should  the  consumer  be  told  when  he  is  buying  storage  goods 
or  left  to  judge  goods  entirely  by  appearance  and  flavor  ? 

29.  Would  prices  presumably  be  affected  by  placarding  cold- 
storage  goods  as  such?  Why?  Would  the  supply  situation  be 
affected  thereby?   the  demand  situation? 

30.  How  long  are  eggs  actually  held  in  storage  on  the  average  ? 
poultry  ?  beef  ?  What  natural  or  economic  forces  tend  to  limit  the 
period  ? 

31.  Can  cold  storage  be  used  as  a  means  of  manipulating  market 
stocks  of  food  products  as  a  means  of  securing  abnormally  high  prices  ? 
Are  there  any  automatic  checks  upon  such  speculative  operations? 
Relate  your  answers  to  the  principles  of  value  brought  out  in  the 
preceding  chapter. 

32.  Does  the  average  American  farmer  prefer  to  sell  his  products 
to  the  professional  traders  at  harvest  time  or  to  hold  them  to  some 
future  time  in  the  hope  of  getting  a  higher  price?  Why?  What 
commodities  ? 

^.  In  case  he  stores  his  crop,  is  any  advance  in  price  a  net  gain  ? 
What  deductions  must  be  made  from  such  gross  profits  ? 

34.  Is  the  cost  of  storage  on  the  farm  greater  or  less  than  the 
dealers'  cost  of  storage  ?    Is  the  loss  or  deterioration  greater  or  less  ? 

35.  Does  it  cost  the  farmer  more  to  deliver  his  products  to  the 
dealer  or  shipper  at  harvest  time  than  later,  or  does  it  cost  less  ? 

36.  Is  it  certain  that  there  will  be  an  advance  ?  Would  there  be 
if  producers  hold  their  goods  off  the  market  now  and  all  dump  their 
product  later?  in  case  they  "hedge"  at  the  time  of  putting  in 
storage  ? 

37.  Even  if  there  should  be  an  advance  in  price,  is  it  certain  that 
the  farmer  will  be  in  a  position  to  take  advantage  of  it  ?  What  might 
prevent  his  doing  so  ? 

38.  Does  the  fact  that  farmers  are  in  a  position  to  store  their 
crop  or  to  sell  it  at  once,  as  they  see  fit,  improve  their  strategic  situa- 
tion in  bargaining  with  prospective  buyers  ?     Explain. 

39.  How  is  it  possible  for  the  farmer  who  needs  money  at  once  to 
pay  debts  to  get  this  money  and  still  retain  control  of  his  product,  so 
that  he  may  benefit  from  a  later  advance  in  the  price  ? 


54  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

40.  Explain  the  "  public "  warehouse  system.  Do  we  have  any 
government-owned  warehouses  for  agricultural  products  ?  Would  it 
be  desirable  ? 

PROBLEMS 

1.  "The  volume  of  export  business  is  an  important  factor  in  the 
price  of  mill  feed,  such  as  bran.  In  recent  years  ocean  rates  on  wheat 
have  been  considerably  less  than  the  rates  on  flour,  thus  decreasing 
export  trade  in  flour.  Mills  in  this  country  have  the  capacity  to 
grind  every  bushel  of  our  wheat,  and  every  bushel  ground  in  this 
country  leaves  sixteen  pounds  of  mill  feed  for  the  American  farmer. 
Millers  have  for  years  been  trying  to  secure  an  equalization  of  wheat 
and  flour  rates  on  ocean  vessels.  Should  dairymen  join  with  them 
and  accomplish  this  result,  mill-feed  supplies  would  be  enlarged  and 
prices  lowered.' '  Is  this  a  case  of  discriminatory  rates?  Is  a  rate 
of  fifty  cents  more  on  flour  than  on  wheat  justified  by  greater  cost  of 
handling  ?    Draw  up  as  full  a  list  as  you  can  of  cases  of  discrimination 

(a)  between  different  sections  of  production  of  agricultural  products, 

(b)  between  different  farm  products  or  between  farm  products  and 
manufactured  articles,  etc. 

2.  "Nobody  appears  to  try  seriously  to  lay  the  blame  for  high 
prices  at  the  door  of  the  railroads.  In  the  five-year  period  1884-88 
the  average  cost  of  carrying  a  bushel  of  wheat  from  Chicago  to  New 
York  by  rail  was  16.32  cents;  in  1908,  10.60  cents.  The  railroad 
gets  only  about  1  cent  a  pound  for  bringing  butter  from  the  Mississippi 
River  to  Boston,  and  chickens  are  brought  from  Chicago  for  about 
J  of  a  cent  a  pound.  Whether  or  not,  in  spite  of  this  situation,  the 
railroads  are  still  charging  too  much  and  making  profits  too  large 
would  take  the  most  expert  investigation  to  determine. "  Have  rates 
upon  farm  products  in  general  fallen  in  proportion  to  the  Chicago- 
New  York  rate  on  wheat?  Is  the  comparison  with  previous  rates 
or  a  study  of  the  net  profits  of  the  roads  the  better  basis  for  judgment 
on  the  correctness  of  rates  ? 

3.  "All  employees  of  the  railroads  have  instructions  'to  secure 
additional  revenue.'  Very  few  lines  can  be  trusted.  They  will 
promise  you  lower  adjustments  and  then  they  will  begin  to  plan 
increases  instead  of  reductions.  Look  back  over  the  past  four  years 
and  you  will  find  many  increased  rates,  lengthened  schedules,  higher 
refrigeration  charges,  and  other  underhand  methods  which  are  eating 
at  the  arteries  of  your  business  and  impeding  the  proper  distribution 
of  fruits  and  vegetables."  Contrast  these  bitter  words  with  the  quo- 
tation above  (2).  Can  you  explain  the  difference?  (The  former  is 
from  the  Massachusetts  [19 10]  cost-of-living  report,  the  latter  from 
the  Traffic  Committee  of  a  trade  association  [19 16].) 


TRANSPORTATION  AND  STORAGE  55 

4.  "The  extent  to  which  rates  should  be  graduated  according  to 
distance  is  still  one  of  the  greatest  transportation  problems.  Some 
believe  in  ' postage  stamp'  rates,  others  in  a  rigid  adherence  to  the 
distance  principle.  It  is  believed  by  most  students  of  the  problem, 
however,  that  the  compromise  system  gradually  developed  by  the 
railroads — in  spite  of  many  inconsistencies  and  discriminatory  prac- 
tices— has  worked  out  to  the  greatest  advantage  of  everyone  con- 
cerned and  has  been  a  great  factor  in  the  orderly  development  of  the 
country."     Explain  this  fully.     Do  you  agree? 

5.  "Until  the  railway  service  of  the  United  States  became  finally 
and  fully  connected  East  and  West  (about  1861)  the  greater  part  of 
the  substantial  food  of  each  community  was  of  necessity  produced 
within  a  short  distance  of  the  populous  centre.  Under  these  condi- 
tions the  best  land  of  each  state,  near  towns  and  cities,  was  neces- 
sarily devoted  to  the  production  of  the  coarser  staples,  i.e.,  Indian 
corn,  hay,  meat,  potatoes,  and  the  like.  When  distribution  became 
less  costly,  those  coarser  and  more  bulky  products  of  agriculture 
became  border  crops,  and  much  land  which  had  previously  been 
devoted  to  their  production  in  the  East  was  now  released  and  became 
used  for  market  gardens,  small  fruits,  and  such  purposes."  Was 
there  an  economic  gain  to  society  from  this  process  ?  Was  there  a 
benefit  to  eastern  landowners  ?  to  western  landowners  ?  to  workmen 
(a)  in  their  cost  of  living?  (b)  in  their  industrial  opportunities? 
(c)  otherwise? 

6.  "The  agricultural  promotion  projects  of  railroad  companies 
include,  not  only  efforts  to  make  farms  yield  greater  returns  and  to 
increase  the  number  of  farmers,  but  also  efforts  to  make  more  land 
available  for  farming  purposes."  May  the  zeal  of  the  roads  to  get 
traffic  lead  to  the  opening  up  of  unprofitable  or  less  profitable  areas  ? 
May  it  lead  to  local  or  to  general  overproduction  ?  A  grower  writes: 
"You  railroad  people  have  got  us  to  raise  a  whole  lot  of  stuff  and  now 
we  can't  sell  it."  Is  such  a  difficulty  temporary  or  permanent? 
What  was  the  economic  benefit  or  harm  wrought  by  Mr.  J.  J.  Hill's 
agricultural  development  work  ? 

7.  In  a  certain  Red  River  Valley  community  in  i860,  "the 
principal  crops  as  measured  by  the  number  of  bushels  in  order  of  their 
importance  were  corn  ( !) ,  potatoes,  oats,  wheat,  and  rye.  Small  quan- 
tities of  butter,  cheese,  tobacco,  maple  sugar,  barley,  hay,  and 
slaughtered  animals  were  also  produced.  This  period  of  diversified 
agriculture  lasted  until  about  1876.  After  that  more  railroads  and 
cheaper  freight  rates  brought  the  one-crop  system  and  the  bonanza 
farms  for  which  the  Red  River  Valley  is  famous."  Can  we  lay  the 
blame  for  the  one-crop  system  on  the  railroad  in  general  ?  Was  there 
an  economic  gain  to  the  people  of  the  United  States  when  the  Red 


56  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

River  Valley  went  in  for  wheat-raising?  Explain.  Is  a  one-crop 
system  profitable  to  the  railroads  ?  Why  ?  Is  there  a  suitable  degree 
of  diversification  which  is  still  more  profitable  ?    Why  ? 

8.  A  bill  was  introduced  in  the  present  Congress  (1916-17) 
designed  to  limit  the  period  for  which  any  food  products  might  be 
held  in  cold  storage  to  three  months.  Was  it  a  wise  measure? 
Explain  just  what  effect  it  would  have  upon  the  present  organization 
of  the  egg,  butter,  and  meat  business. 

9.  "The  general  belief  that  any  reduction  in  freight  rates  will  go 
to  the  producer  is  entirely  erroneous  so  far  as  it  applies  to  wheat. 
The  reduction  which  was  intended  for  the  producer  in  fact  went  to 
the  consumer,  reducing  the  price  to  the  farmers  of  the  entire  world. 
Even  if  the  entire  freight  charge  were  wiped  out,  it  would  not,  in  the 
long  run,  add  one  penny  to  the  price  received  by  the  farmer,  because 
sellers  in  the  Liverpool  market  would  offer  wheat  lower."  Is  this 
argument  sound?  Might  it  appear  to  be  quite  true  under  certain 
circumstances  and  doubtful  or  not  true  under  others  ?  Does  the  fact 
that  this  statement  was  based  upon  the  experience  of  1898  have  any 
significance  ?  that  it  was  uttered  by  a  Dakota  farmer  ? 

10.  "The  farmers'  elevators  are  slowly,  year  by  year,  driving  out 
the  independent  and  the  line  elevators.  Now  they  are  trying  to  get 
co-operatively  owned  terminal  elevators.  There  is  also  a  movement 
for  state-owned  terminal  elevators.  Thirty  years  ago  the  railroads 
owned  and  controlled  the  terminal  elevators,  for  in  no  other  way 
could  adequate  storage  be  found  for  their  grain  shipments.  Abuses 
of  various  kinds  arose,  but  there  also  grew  up  adequate  government 
supervision  and  control."  What  advantages  can  you  point  out  that 
there  might  be  from  taking  terminal  elevators  out  of  the  control  of 
the  railroads  ?  out  of  control  of  other  private  corporations  ?  Would 
it  be  better  to  make  them  state  institutions  or  to  have  them  owned 
and  operated  co-operatively  ? 

ADDITIONAL  REFERENCES 

Johnson  and  Huebner,  Railway  Traffic  and  Rates. 

Weld,  The  Marketing  of  Farm  Products,  chap.  xi. 

,  Private  Freight  Cars  and  American  Railways  (Columbia  Studies, 

1908). 

White,  "Demurrage  Information  for  Farmers,"  Bulletin  191,  U.S.  Depart- 
ment 0}  Agriculture. 

" Reducing  the  Cost  of  Food  Distribution,"  The  Annals,  November,  1913. 

National  Conference  on  Marketing  and  Farm  Credits,  Proceedings  of  the 
third  annual  conference. 

King,  A  Study  of  Trolley  Light  Freight  Service  and  Philadelphia  Markets. 

"  Economic  Surveys  of  County  Highway  Improvement,"  Bulletin  393,  U.S. 
Department  of  Agriculture. 


TRANSPORTATION  AND  STORAGE  57 

TOPICS  FOR  SPECIAL  PAPERS 

How  Transportation  Facilities  and  Costs  Influence  the  Farming  Condi- 
tions of County  (or  other  area). 

An  Economic  Survey  of  Local  Highway  Needs. 

Latest  Development  in  Refrigerated  Car  Service  and  Their  Effect  on 
Farming. 

Present  Methods  and  Services  of  Cold  Storage  Warehouses. 

How  Local  Marketing  Operations  are  Affected  by  Storage  in  Transit  or 
Similar  Special  Traffic  Arrangements. 

Relations  of  the  Public  Warehouse  to  the  Farmer  and  the  Public. 

Why  Public  Warehouses  Should  Be  Compelled  to  Make  Periodic  State- 
ment of  Their  Holdings. 

Terminal  Facilities  in (some  near-by  city). 

The  War  and  the  Transportation  of  American  Food  Products. 

The  Routing  of  Shipments  of  Grain  and  Cotton  in  the  United  States  with 
Reasons  Therefor. 


XI.  THE  RENT  AND  VALUE  OF  FARM  LAND 

QUESTIONS 

i.  What  is  meant  by  "  distribution "  in  the  language  of  the 
economist  ?     Distribution  of  what  ? 

2.  It  has  sometimes  been  said  that  distribution  is  the  only  really 
important  problem  in  practical  economics.  Is  this  true?  Is  the 
amount  to  be  distributed  something  about  which  we  need  not  worry 
or  over  which  we  have  no  control  ? 

3.  What  relation  does  this  section  bear  to  the  section  dealing  with 
production  ?  to  that  which  deals  with  consumption  ?  Can  you  show 
how  good  distributive  conditions  would  improve  conditions  of  pro- 
duction ? 

4.  Who  are  the  parties  to  distribution?  By  what  mechanism, 
devices,  or  institutions  is  the  process  of  distribution  effected  ?  What 
is  an  economic  institution  ? 

5.  State  briefly  the  so-called  Ricardian  doctrine  of  rent.  What 
is  meant  by  "original  and  indestructible  powers  of  the  soir'  ?  (Look 
back  to  chapter  iii,  particularly  Section  C,  in  answering  this  question.) 

6.  What  is  meant  by  a  "differential"  return?  Under  what  con- 
ditions will  there  be  no  differential  ?  Would  we  then  have  a  no-rent 
society  ? 

7.  Is  such  a  condition  a  practical  possibility?  Do  we  have  rent 
at  the  same  time  'at  which  there  are  unused  lands  ?  fertile  lands  which 
are  unused  ? 

8.  What  is  the  margin  above  which  differential  productivity  is 
measured  ?  Are  we  concerned  about  physical  productivity  or  value 
productivity  ? 

9.  When  we  talk  about  using  the  "best"  land  first,  do  we  neces- 
sarily mean  the  most  fertile?  What  advantage  may  lead  to  its 
employment  in  advance  of  other  land  ? 

10.  In  general,  what  will  be  the  trend  of  prices  of  the  product 
when  poorer  and  poorer  areas  of  land  are  taken  into  cultivation? 
What  effect  will  this  have  upon  the  returns  of  better  tracts? 
upon  rent  ? 

11.  Do  high  rents  and  high  prices  of  agricultural  products  go  hand 
in  hand?  Can  you  identify  one  as  cause  and  the  other  as  effect? 
Which  is  which  ? 

12.  Show  clearly  the  application  of  the  principle  of  diminishing 
returns  to  the  case  of  land  rent.  Is  there  an  intensive  as  well  as  an 
extensive  margin  from  which  we  measure  differential  returns  and 
compute  rent  ?     (See  Problem  7,  chap,  iii.) 

58 


THE  RENT  AND  VALUE  OF  FARM  LAND       59 

13.  Can  you  describe  a  condition  under  which  all  the  land  within 
a  given  country  would  command  a  rent  payment  ?  Under  such  a  con- 
dition where  is  the  datum  line  from  which  you  measure  your  no-rent 
margin  ?  Suppose  this  to  be  an  island  cut  off  from  communication 
with  all  other  lands,  does  this  alter  your  answer?  Would  such  a 
condition  (i.e.,  rent  for  every  acre)  be  possible  over  the  whole  earth? 

14.  Are  advantages  of  land  which  are  due  to  its  situation  "  origi- 
nal and  indestructible''  ?  Are  transportation  companies  restricted  in 
their  power  of  upsetting  such  natural  conditions?  (This  question 
should  be  related  to  several  in  the  preceding  chapter.) 

15.  Is  the  actual  productivity  of  a  piece  of  land  due  to  its  own 
intrinsic  qualities  or  to  the  way  in  which  some  person  is  employing 
it,  or  to  both  ? 

16.  Does  the  man  who  operates  his  farm  more  skilfully  than  others 
and  therefore  secures  from  it  an  extra  return  get  the  benefit  of  this 
difference,  or  does  he  have  to  hand  it  over  as  rent  ? 

17.  Is  there  an  average  or  ordinary  degree  of  efficiency  of  farm 
users  which  is  discernible  to  those  who  are  bargaining  over  rent  pay- 
ments ? 

18.  Do  the  good  farmers  tend  to  locate  on  the  good  lands  and  the 
poor  farmers  tend  to  be  relegated  to  the  inferior  lands?  Why  and 
how? 

19.  What  do  you  mean  by  "good"  and  "poor"  farmers  in  the 
preceding  question?  If  the  landlord  is  looking  for  the  tenant  who 
will  pay  him  the  largest  rent,  is  it  certain  that  he  will  find  this  require- 
ment met  by  the  man  who  is  technically  most  efficient  ?  May  some- 
one else  overbid  him  because  he  is  willing  to  live  more  cheaply  or  work 
longer  hours  or  do  more  disagreeable  tasks  ?  Are  these  types  of  com- 
petitive efficiency? 

20.  Does  the  payment  which  is  referred  to  in  ordinary  commercial 
usage  as  rent  differ  from  what  we  have  been  discussing  as  economic 
rent? 

21.  Define  contract  rent  and  distinguish  it  from  economic  rent. 
Does  it  include  payment  for  the  use  of  other  things  than  land  ?  Does 
it,  in  the  case  of  bare  land,  represent  a  market  price  for  the  use  of  land 
which  is  different  from  theoretical  amount  which  would  cover  the 
exact  economic  differential  ? 

22.  Do  contract  rents  tend  to  crystallize  about  certain  more  or 
less  customary  rates?  Do  farms  of  different  quality  lying  side  by 
side  often  rent  for  the  same  price  ?  Do  farms  rent  for  the  same  rate 
in  good  years  that  they  do  in  poor  years  ?  Are  such  rates  averages 
of  the  productivity  of  a  period  of  years  ? 

23.  Does  cash  or  share  rent  conform  more  closely  to  actual  con- 
ditions of  productivity  ?    Why  then  do  we  continue  both  systems  ? 


6o  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

24.  Are  many  forms  of  so-called  renting  contracts  also  contracts 
for  labor?  Illustrate  by  Iowa  bushel-renting  and  southern  share- 
cropping. 

25.  May  such  a  contract  also  be  a  contract  for  supervision  or 
entrepreneurship  ?    Illustrate  by  the  stock-share  lease. 

26.  May  it  also  be  a  contract  for  the  use  of  capital-goods  ?  Give 
several  illustrations. 

27.  Do  the  general  propositions  as  to  the  play  of  supply  and 
demand  forces  in  the  making  of  prices  hold  good  in  the  bargaining  of 
landlord  and  tenant  ? 

28.  Does  the  ordinary  purchaser  of  farm  land  buy  with  a  view 
to  the  return  which  the  land  may  be  expected  to  yield  ?  Is  it  correct 
to  think  of  him  as  buying  an  income  ? 

29.  How  much  is  an  income  of  $500  a  year  worth  ?  How  much 
would  you  have  to  invest  in  farm-land  bonds  at  par  to  get  an  income 
of  this  amount  ?  in  individual  mortgages  ?  in  a  hardware  and  feed 
business  ?  Are  all  these  incomes  equally  sure  year  in  and  year  out  ? 
Do  they  all  involve  the  same  amount  of  responsibility  and  labor  of 
superintendence  on  the  part  of  the  recipient  ? 

30.  Suppose  that  in  a  given  community  it  has  been  usual  to  get 
8  per  cent  on  good  first  mortgages,  and  a  change  in  rural  credit 
arrangements  makes  it  possible  to  secure  such  loans  at  5  per  cent,  is 
it  likely  that  persons  who  buy  land  will  pay  more  or  less  under  the 
new  conditions  ? 

31.  What  would  be  meant  by  the  statement  that  land  value  is  the 
" capitalization "  of  its  economic  rent?  What  is  the  capitalization  of 
a  corporation  ? 

32.  In  your  home  community  does  land  actually  sell  for  a  sum 
which  capitalizes  its  earning  power  at  the  going  rate  for  similar 
investments  ? 

33.  Cite  any  conspicuous  departure  from  this  rule  with  which 
you  may  be  familiar.     Can  you  explain  it  ? 

34.  What  is  overcapitalization  of  a  corporation?  May  land  be 
overcapitalized?  Can  you  cite  a  good  example  and  explain  the 
reasons  ? 

35.  What  would  be  the  difference  between  a  speculative  stock 
and  an  investment  stock?  Is  land  a  frequent  object  of  speculative 
activities?    Why?    What  effect  does  this  have  on  market  values? 

36.  Does  speculation  in  land  have  any  relation  to  the  question  of 
tenancy  ?    Explain. 

37.  What  effect  does  the  growth  of  urban  centers  have  upon  farm 
values  in  the  region,  and  why?  improvement  of  transportation 


THE  RENT  AND  VALUE  OF  FARM  LAND       61 

facilities  ?    change  in  the  technique  of  farming  ?    rise  in  the  general 
level  of  prices  ? 

38.  Does  the  value  of  inferior  lands  (e.g.,  swampy,  semi-arid, 
rough)  tend  to  be  higher  or  lower  today,  compared  with  the  prices  of 
the  better  lands,  than  it  was  ten  or  twenty  years  ago?  Give  full 
reasons  for  your  answer. 

39.  What  was  the  value  of  "  abandoned  "  farms  twenty  years  ago  ? 
Why  were  they  abandoned  ?     What  is  their  value  today  ?    Why  ? 

PROBLEMS 

1.  "Rent  tends  to  vary  inversely  with  (1)  efficiency  of  managers, 
workmen,  and  equipment  in  competing  regions  as  a  whole,  (2)  prices 
of  farm  equipments,  wages,  and  other  operating  costs,  and  (3)  the 
abundance  of  good  land."  Are  these  propositions  true?  If  so, 
explain  and  illustrate.     If  not,  point  out  any  errors. 

2.  Suppose  that  wheat  is  raised  by  a  uniform  system  of  extensive 
cultivation  and  that  the  demand  is  such  as  to  take  300  units  (of  a 
million  bushels  each)  at  a  price  which  would  pay  the  current  rate  of 
wages  to  one- third  of  a  day's  labor  (and  its  suitable  capital  equipment). 
The  wheat  land  is  of  three  grades,  A,  B,  and  C.  On  the  first,  100 
days'  labor  will  produce  300  units  of  produce;  on  the  second,  100 
days'  labor  will  produce  250  units;  and  on  the  third  it  will  produce 
200  units.  Under  these  conditions  how  many  grades  of  land  will  be 
used?  Will  rent  be  paid?  How  much?  Suppose  the  increase  of 
home  population  or  the  opening  of  a  foreign  market  creates  a  demand 
for  550  units  at  a  price  equivalent  to  two-fifths  of  a  day's  wage,  what 
rent  will  be  paid  and  to  whom?  Now,  if  the  demand  increases  to 
600  units  at  a  price  to  pay  the  wages  of  one-half  day's  labor,  what 
land  will  be  utilized  and  what  rent  paid  upon  each  grade  ?  Make  a 
chart  to  illustrate  the  three  conditions. 

3.  In  case  there  were  only  two  grades  of  land,  A  and  B,  but  that 
a  second  hundred  days'  labor  on  A  would  produce  250  units  of  product 
and  a  third  like  application  would  yield  150  units,  whereas  a  second 
application  of  labor  to  B  would  produce  200  units  and  a  third  would 
give  125,  what  land  would  be  used  and  what  rent  would  be  paid  under 
each  of  the  three  price  conditions  ?     Make  a  chart  to  illustrate. 

4.  "The  doctrine  of  rent  breaks  down  because  the  doctrine  of 
marginal  cost  is  absurd.  Suppose  that  the  marginal  cost  of  wheat 
to  a  certain  farmer  is  70  cents  per  bushel  and  that  wheat  is  selling 
for  70  cents.  If  the  average  cost  to  this  farmer  is  50  cents,  he  will 
be  under  strong  incentive  to  increase  his  output.  This  marginal  cost 
does  not  operate  so  powerfully  as  average  cost  in  price  determination, 


62  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

and  thus  the  rent  theory  breaks  down."  Is  this  view  correct?  If 
the  fact  is  as  stated,  does  it  constitute  an  impeachment  of  the  doctrine 
of  rent  or  of  the  farmer's  economic  intelligence  ? 

5.  "Under  conditions  of  free  competition  the  landlord  cannot  get 
a  penny  more  than  the  economic  rent  of  his  land.  Likewise,  if  com- 
petition is  free  and  active,  the  tenant  cannot  get  the  land  for  a  penny 
less  than  the  amount  of  its  economic  rent."  Show  carefully,  step  by 
step,  how  this  process  of  adjustment  would  be  worked  out.  Is  com- 
petition of  this  sort  the  rule  in  American  farming  communities? 
What  is  the  long-run  tendency  ? 

6.  A  Congressional  committee  reports:  "One  of  the  many  causes 
contributing  to  the  advance  in  prices  is  the  increased  cost  of  produc- 
tion of  farm  products  by  reason  of  higher  land  values."  Explain  fully 
how  this  operates  from  cause  to  effect  or,  if  you  think  the  statement 
incorrect,  explain  fully  your  grounds  for  differing. 

7.  "The  profit  required  by  the  landlord  is  in  proportion  to  his 
risk  and  trouble.  In  Tompkins  County,  New  York,  the  landlords  who 
rented  for  cash  made  an  average  of  5 .2  per  cent;  those  who  owned 
part  of  the  stock,  paid  part  of  the  expenses,  and  received  half  of  the 
receipts  made  9  per  cent.  The  tenants  who  rented  for  cash  made  an 
average  of  $604  for  their  labor;  those  who  rented  for  a  share  made  an 
average  of  $342."  Does  this  statement  correspond  with  the  facts  in 
your  own  community?  Does  this  apply  to  economic  rents  or  only 
to  contract  payments  from  lessee  to  lessor  ?  If  one  rents  bare  land, 
furnishing  neither  stock  nor  implements,  is  there  likely  to  be  a  higher 
average  rental  paid  in  the  sharing  of  product  than  in  cash  renting  ? 
What  risk  is  involved  ? 

8.  "The  first  settlers  are  seen  to  have  established  themselves  on 
the  barren  soil  of  Massachusetts.  The  whole  continent  was  before 
them,  but,  were  the  reader  inclined  to  designate  the  soils  of  the  Union 
least  calculated  for  the  production  of  food,  his  choice  would  fall  upon 
the  rocky  lands  first  occupied  by  the  hardy  Puritans.  Everywhere  it 
has  been  the  lighter  and  poorer  soils  which  have  first  been  used."  Is 
this  a  refutation  of  the  fundamental  propositions  upon  which  our  rent 
theory  rests  ?     Explain  fully. 

ADDITIONAL   REFERENCES 

Standard  texts  in  general  economics. 

Special  treatises  on  distribution,  e.g.,  Carver,  Distribution  of  Wealth. 

Johnson,  "Rent  in  Modern  Economic  Theory/'  Publications  of  the  American 

Economic  Association,  3d  series,  Vol.  III. 
Walker,  Land  and  Its  Rent. 
George,  Progress  and  Poverty. 
Carver,  Principles  of  Rural  Economics,  chap.  v. 


THE  RENT  AND  VALUE  OF  FARM  LAND      63 

Taylor,  Agricultural  Economics,  chap.  ix. 

,  "Two  Dimensions  of  Productivity,"  American  Economic  Review, 

Supplement,  March,  191 7. 
Tichenor,  Farm  Contracts  between  Landlord  and  Tenant 

TOPICS  FOR  SPECIAL  PAPERS 

The  Theory  of  Rent  Illustrated  from  Concrete  Farming  Practice. 
Local  Renting  Contracts. 

The  Rate  of  Capitalization  Exhibited  in  Local  Land  Values. 
Analysis  of  the  Different ial  Advantages  Which  Are  Taken  into  Account 
in  Valuing  Farm  Lands. 


XII.  LAND  TENURE  AND  LAND  POLICY 

QUESTIONS 

i.  Does  the  landowning  farmer  work  harder  than  the  tenant? 
Why  ?     Is  he  likely  to  follow  a  better  farm  practice  ?     Why  ? 

2.  Explain  the  reasons,  both  of  inclination  and  of  necessity,  which 
would  explain  a  smaller  percentage  of  livestock  on  tenant  farms. 

3.  Does  tenancy  produce  as  good  results  as  ownership  under  a 
one-crop  system  of  farming  ?     Why  ? 

.4.  Is  tenancy  as  satisfactory  as  ownership  if  the  term  of  the  lease 
be  long  ?    How  long  should  it  be  ? 

5.  What  sort  of  a  rotation  can  be  followed  under  a  one-year-lease 
system  ?  What  effect  does  an  extremely  short  tenure  have  upon  the 
tenant's  equipment  of  implements  ?  of  stock  ?  upon  his  policy  with 
regard  to  fertilizer  ?  upon  his  acre-yields  ?  Give  the  reasons  as  fully 
as  possible  in  each  case. 

6.  Is  a  one-year-lease  system  "a  national  waste"?    Explain. 

7.  Does  the  fact  that  a  certain  group  of  tenants  are  making  larger 
labor  incomes  than  farm-owners  in  the  same  community  indicate  that 
the  former  are  better  farmers  ?    What  does  it  indicate  ? 

8.  Show  that  many  types  of  leasing  arrangements  are,  in  fact, 
business  partnerships.  * 

9.  Is  share  renting  suited  to  extensive  or  intensive  forms  of  agri- 
culture ?  Cite  illustrations  to  prove  your  point.  Do  you  know  of  any 
cases  which  are  inconsistent  with  your  general  statement  ?  Can  you 
explain  ? 

10.  What  type  of  lease  is  most  suited  to  the  non-resident  land- 
lord ?  Why  ?  What  type  does  the  landlord  who  is  a  retired  farmer 
and  lives  near  by  prefer?  Why?  How  about  the  small- town 
banker  ? 

n.  Explain  the  stock-share  plan  of  renting  and  point  out  its 
advantages.  Do  you  agree  that  this  is  particularly  desirable  for  the 
young  farmer  ?    Why  ? 

12.  Does  stock-share  renting  form  a  natural  transition  between 
wage-work  and  farm  ownership?  Explain  the  steps  by  which  this 
would  be  brought  about. 

13.  Is  this  equally  true  of  ordinary  share  renting  or  the  share 
cropping  of  the  South?  How  about  cash  renting?  Point  out  the 
difficulties  of  relying  upon  cash  renting  alone  under  present  conditions 
in  the  United  States. 

14.  If  it  appears  that  on  the  average  the  landlord  makes  more 
when  he  rents  on  some  share  system,  why  does  the  tenant  use  this 

64 


LAND  TENURE  AND  LAND  POLICY         65 

method  ?     By  the  same  token,  why  does  the  landlord  ever  consent 
to  the  smaller  returns  which  he  averages  from  cash  renting  ? 

15.  If  "247  tenant  farmers  made  an  average  labor  income  of 
$870  from  an  investment  of  less  than  $2,500  while  farm-owners  with 
over  twelve  times  this  investment  made  less  than  half  as  large  labor 
incomes,"  would  you  say  that  the  purchase  of  land  should  be  the  first 
ambition  of  every  young  farmer  ? 

16.  What  do  the  figures  in  the  previous  question  indicate  as  to 
the  rate  at  which  economic  rent  is  capitalized  in  the  land  values  of 
this  community  ?     Can  you  explain  the  situation  ? 

17.  Would  the  stock-share  type  of  lease  be  suitable  to  the  principal 
kinds  of  farm  enterprise  which  are  carried  on  in  your  community? 
If  so,  would  certain  of  its  details  require  modification  ?  How  does  it 
differ  from  arrangements  now  in  vogue  ? 

18.  If  you  think  that  the  stock-share  lease  is  not  practicable  in 
your  community,  are  the  reasons  for  its  unsuitability  (a)  the  kinds  of 
products  raised?  (b)  the  inability  or  unwillingness  of  landlords  to 
participate  to  the  necessary  degree?  (c)  undesirable  quality  of  the 
tenant  population  ?  (d)  other  reasons  ?    Explain  fully. 

19.  Is  the  proportion  of  tenancy  in  the  United  States  increasing 
or  decreasing  ?  At  how  rapid  a  rate  ?  How  does  the  rate  of  the  last 
census  period  compare  with  that  of  the  one  preceding  ?     Give  reasons. 

20.  How  do  the  proportions  in  different  sections  of  the  country 
compare  with  one  another?  Why?  Does  the  tendency  appear  to 
be  for  such  differences  as  exist  to  disappear,  to  increase,  or  to  remain 
stationary  ?     Can  you  assign  any  reasons  for  this  situation  ? 

21.  What  is  a  "part  owner"  and  why  should  he  be  distinguished 
in  our  statistics  ?  Does  he  partake  more  of  the  nature  of  an  owner 
or  of  a  renter  ?    How  ?    What  qualities  peculiar  to  himself  has  he  ? 

22.  What  reasons  are  there  for  presenting  the  statistics  of  tenancy 
in  terms  of  the  acreage  held  under  the  various  tenures  instead  of  the 
number  of  operators  of  the  different  kinds  ? 

23.  If  the  figures  be  presented  in  this  latter  form,  what  different 
conclusions  is  one  likely  to  draw  as  to  the  relative  prevalence  of  farm 
tenancy  in  different  sections  of  the  country  ?  Does  it  alter  one's  con- 
clusions as  to  a  drift  toward  or  away  from  tenancy  ? 

24.  Do  the  figures  indicate  that  farm  operation  by  managers  is 
increasing  or  declining  ?  Is  it  relatively  important  as  compared  with 
other  forms  of  operation  ? 

25.  Should  we  put  in  a  separate  class  those  farm-owners  whose 
property  is  encumbered  with  a  mortgage  ?  Show  what  peculiarities 
this  class  presents  and  how  they  are  related  to  other  groups. 

26.  What  arguments  can  be  adduced  to  show  that  farm  tenancy 
in  the  United  States  is  a  progressive  and  wholesome  condition  ?    Do 


66  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

these  arguments  square  with  the  facts  in  your  own  community  or  is 
tenancy  an  indication  that  the  farm  operator  is  going  backward  ? 

27.  Does  the  experience  of  other  countries  give  ground  for  fear 
that  the  inevitable  tendency  is  toward  an  ever-increasing  percentage 
of  non-owning  farmers  and  harder  and  harder  conditions  for  these 
tenants  ? 

28.  Is  this  equally  the  testimony  of  all  the  countries  of  Europe  ? 
If  conditions  in  some  are  worse  and  in  others  better,  how  can  you 
account  for  the  differences  ? 

29.  Are  conditions  in  America  such  as  to  make  us  more  susceptible 
to  such  dangers  or  relatively  to  protect  us  from  them?  Give  your 
reasons. 

30.  If  all  farmers  leased  their  land  from  their  respective  state 
governments  or  from  the  federal  government,  is  it  likely  that  we 
should  talk  about  a  " tenancy  problem "  ?     Why  or  why  not? 

31.  Under  such  a  system  do  you  think  land  would  be  better 
utilized  or  not  so  well  utilized?  Why?  Would  there  still  be  an 
economic  rent  accruing  ?  If  so,  should  a  payment  of  this  amount  be 
made  to  the  government  for  the  use  of  the  land  ? 

32.  Under  the  foregoing  system  show  how  the  individual  farmer 
would  be  worse  off  or  better  off,  as  the  case  may  be,  than  under 
existing  conditions  of  private  property  in  land. 

^.  Show  how  society  would  be  worse  off  or  better  off.  Mention 
probable  administrative  difficulties  and  abuses. 

34.  What  is  meant  by  "  private  property  in  land"  ?  by  ownership 
in  "fee  simple"  ?  by  an  "estate"  in  land?  May  there  be  forms  of 
ownership  which  are  limited  in  character  ?  Are  there  any  which  are 
absolutely  unlimited  ? 

35.  Explain  the  conditions  under  which  the  landlord- tenant  rela- 
tion in  agriculture  is  mutually  desirable.  Is  it  conceivable  that  the 
whole  industry  could  be  organized  upon  a  basis  of  ownership  of  the 
land  by  a  class  of  inactive  owners  (of  land  and  possibly  of  equipment) 
and  of  active  operators  who  contribute  labor  and  management,  the 
former  receiving  a  small  but  certain  and  regular  return  upon  their 
investment  and  the  latter  the  fluctuating  but  larger  gains  of  business 
entrepreneurship  ? 

36.  Does  the  foregoing  condition  exist  in  other  lines  of  business  ? 
Does  the  ordinary  merchant  consider  it  essential  that  he  should  own 
the  property  he  occupies  ?  Why  ?  Does  the  big  manufacturing  or 
transportation  company  own  the  landed  property  with  which  it  works  ? 
Supposing  that  on  the  average  thj  bonded  debt  of  corporations  equals 
the  value  of  their  real  estate,  what  bearing  does  this  have  upon  the 
preceding  question  ? 


LAND  TENURE  AND  LAND  POLICY         67 

37.  Are  there  reasons  why  it  is  more  essential  that  the  farm  opera- 
tor should  also  be  the  farm-owner  than  that  industrial  and  mercantile 
operators  should  own  the  land  they  use  ?     Explain  fully. 

38.  Has  the  land  policy  of  the  United  States  aimed  to  secure  the 
benefits  of  personal  ownership  to  the  man  who  works  the  farm  ?  What 
measures  have  been  taken  toward  this  end  ?  Has  the  desired  purpose 
been  accomplished?  Have  some  results  which  it  was  desired  to 
avoid  in  fact  been  brought  about  ?  Was  the  defect  in  the  system  or 
in  the  way  in  which  we  have  applied  it  ? 

39.  What  are  the  most  promising  means  of  redirecting  that  move- 
ment toward  the  intended  goal  ? 

40.  Explain  the  purpose  and  mode  of  operation  of  a  graduated  or 
progressive  land  tax.  Has  such  a  measure  ever  been  agitated  in  your 
state  ?  By  what  interests,  and  with  what  result  ?  If  not,  try  to  get 
the  history  of  such  a  movement  in  some  other  state. 

41.  Describe  the  "small  holdings"  movement  in  England.  What 
has  been  the  effect  of  the  European  war  upon  farm  tenure  in  England  ? 

42.  Is  "the  tenant  problem"  one  thing  or  many?  Is  it  to  be 
solved  by  some  panacea  or  are  a  large  number  of  present  maladjust- 
ments in  the  socio-economic  relations  of  the  various  parties  to  our 
agricultural  industry  to  be  gradually  removed  by  separate  and  partial 
reforms  ? 

43.  Is  there  some  abiding  source  of  difficulty  which  will  probably 
always  cause  mankind  to  be  confronted  with  a  land  problem  ?  What 
is  it? 

PROBLEMS 

1.  "It  is  estimated  that  three  out  of  every  four  Iowa  tenant 
farms  are  leased  from  year  to  year.  Short-time  speculators  invariably 
use  one-year  leases  containing  the  sale  clause.  As  the  rent  and  price 
of  the  land  advance,  they  are  free  each  year  to  raise  the  rent  or  sell 
the  farm.  As  a  rule,  they  know  very  little  about  farming  and  direct 
or  allow  methods  that  exploit  the  land.  On  such  places  tenants  fail 
to  equip  the  farm  with  the  necessary  tools  and  livestock  to  operate 
it  most  successfully.  Neither  tenant,  landlord,  nor  society  is  getting 
the  highest  returns  from  the  farm."  Is  such  a  condition  one  which 
tends  to  grow  worse  or  gradually  to  correct  itself  ?  Is  it  one  which 
could  be  met  by  any  practicable  form  of  legislation  ? 

2.  "Perhaps  there  is  no  important  provision  in  the  average  con- 
tract that  is  so  neglected  as  the  one  which  calls  for  a  reward  to  the 
tenant  and  the  landlord  for  the  unexhausted  improvements  made  on 
the  farm."  Point  out  the  evil  results  that  flow  from  such  a  situation. 
Is  there  also  an  injustice  in  not  being  able  to  charge  either  party  for 


68  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

impairment  in  the  property  ?     Is  there  any  simple  way  of  measuring 
the  value  of  such  items  ?     How  about  slow-acting  fertilizers  ? 

3.  "The  principal  reason  why  there  are  not  more  tenants  renting 
under  the  stock-share  lease  is  to  be  found  in  the  tenant's  and  land- 
lord's dislike  for  any  method  of  renting  which  requires  common  counsel 
and  close  co-operation.  The  tenant  chafes  under  the  landlord's 
supervision,  and  the  landlord  distrusts  the  integrity  and  ability  of  the 
tenant."  Do  you  observe  similar  conditions  in  your  community? 
Why  is  it  the  case  ?    How  can  the  situation  be  remedied  ? 

4.  "We  are  still  in  the  period  of  development  of  American  agri- 
culture when  we  are  using  much  of  the  original  equipment  of  American 
farms.  It  will  be  when  present  equipment  has  passed  its  usefulness 
that  the  real  significance  of  the  transition  from  ownership  to  tenantry 
will  become  apparent.  Either  old,  tumble-down  houses,  the  ghosts  of 
a  former  prosperity,  inhabited  by  a  low-grade  population  willing  to 
live  in  inferior  quarters,  will  survive,  or  a  new  type  of  houses  built  for 
tenants  will  appear."  Explain  what  this  means  in  terms  of  your  own 
community.  Do  you  agree  with  the  same  writer's  further  conclusion 
that  "alleviative  policies,  such  as  planning  tenant  houses  or  devising 
tenant  contracts,  cannot  offer  a  permanent  solution  of  the  problem; 
we  should  seek  to*remove  the  causes  that  have  made  the  appearance 
of  a  tenant  class  in  America  possible"?  What  are  these  causes? 
How  are  they  to 'be  removed  ?  Might  the  last  word  in  the  quotation 
be  changed  to  "inevitable"? 

5.  "Half  of  the  farm  lands  in  Texas  are  included  in  2  .7  per  cent 
of  the  farms."  What  are  likely  to  be  the  results  of  this  condition? 
Is  the  same  situation  found  in  other  states  ?    Why  ? 

6.  "We  cannot  think  straight  on  the  land  problem  if  we  are  going 
to  assume  that  there  is  anything  morally  wrong  in  owning  land.  This, 
that,  or  the  other  individual  landowner  may  abuse  his  power;  but  the 
general  institution  of  private  property  in  land  is  a  question  of  expe- 
diency— not  morals."  Do  you  agree?  Does  the  socialist  ?  Does  the 
single-taxer  ?  Point  out  why  you  believe  it  expedient  or  not  expe- 
dient that  we  have  private  ownership  of  land  upon  existing  terms. 
State  any  modifications  in  the  present  system  which  you  believe  would 
be  expedient. 

7.  (a)  "The  same  progress  which  makes  intensive  farming  neces- 
sary tends  also  to  augment  the  numbers  of  those  who  must  hire  the 
land  which  they  cultivate."  (b)  "Tenancy  is  not  the  normal  state 
of  man,  and  we  have  been  accustomed  to  look  on  the  American  farmer 
as  necessarily  the  owner  of  the  acre  he  tilled."  Is  there  a  clash  of 
opinion  between  these  two  statements  ?  Explain  each  of  them  and 
set  forth  the  truth  of  the  matter. 


LAND  TENURE  AND  LAND  POLICY         69 

8.  "In  considering  the  relative  merits  of  ownership  and  tenancy 
from  the  standpoint  of  society,  we  should  not  forget  that  there  are 
many  men  who  should  not  be  trusted  with  a  farm  absolutely  under 
their  own  control.  The  reason  they  fret  under  a  landlord  is  because 
they  prefer  to  farm  by  easy  and  wasteful  methods."  What  truth  is 
there  in  this  view  ? 

9.  "On  the  other  hand,  we  have  the  large  and  stubborn  fact  that 
the  best  agriculture  in  the  world  is  carried  on  under  the  tenancy 
system.  The  most  efficient  system  of  general  farming  is  found  in 
England,  where  the  tenancy  system  prevails;  and  the  most  efficient 
growing  of  agricultural  specialties  is  found  on  the  very  small  gardens 
in  the  neighborhood  of  Paris,  where  the  land  is  not  generally  owned 
by  the  gardener."  Can  you  cite  similar  evidence  in  this  country? 
Can  you  explain  how  the  English  tenant  system  has  been  worked  out 
so  satisfactorily?  Would  a  similar  adjustment  in  America  be 
desirable  ? 

ADDITIONAL  REFERENCES 

Spillman  and  Goldenweiser,  "Farm  Tenantry  in  the  United  States,"  Year- 
book of  the  U.S.  Department  of  Agriculture,  1916,  p.  321. 

Carver,  Selected  Readings  in  Rural  Economics,  chap.  iii. 

Taylor,  "The  Decline  of  Landowning  Farmers  in  England,"  University  of 
Wisconsin  Bulletin  q6. 

,  Agricultural  Economics,  chaps,  xi-xiii. 

Kinnear,  Principles  of  Property  in  Land. 

Report  of  the  Industrial  Commission  (1900),  Vol.  X. 

"Proceedings  of  the  Twenty-ninth  Annual  Meeting  of  the  American  Eco- 
nomic Association,"  American  Economic  Review,  Supplement,  March, 
1917. 

"Studies  in  Farm  Tenancy  in  Texas,"  Bulletin  of  the  University  of  Texas, 
1915,  No.  21. 

"Systems  of  Renting  Truck  Farms  in  Southwestern  New  Jersey,"  Bulletin 
411,  U.S.  Department  of  Agriculture. 

TOPICS   FOR   SPECIAL  PAPERS 

The  Proper  Place  of  Tenancy  in  American  Agriculture. 

How  Tenant  Farming  May  Be  Made  Good  Farming. 

Opening  the  Door  to  Ownership  of  Land. 

The  Evils  of  Short  Leases  and  How  They  May  Be  Avoided. 

The  Landlord  as  Partner. 

Curbing  the  Speculator  in  Farm  Land. 

Absentee  Landlordism. 

Comparison  of  "Part  Owner"  with  Encumbered  Owner. 


XIII.    INTEREST  ON  FARM  LOANS 

QUESTIONS 

i.  When  the  farmer  makes  a  business  loan,  does  he  do  so  because 
he  expects  it  to  add  to  the  productivity  of  his  farm  enterprise  ?  Is 
money  productive  ?  How  does  he  expect  to  make  the  money  a  means 
to  increased  production  ? 

2.  Does  his  willingness  to  pledge  certain  security  and  obligate 
himself  to  make  certain  interest  payments  depend  upon  his  estimate 
of  the  technical  possibilities  of  certain  capital-goods  ? 

3.  Would  it  be  correct  to  say  that  the  demand  for  capital  depends 
upon  the  opportunities  for  productive  use  of  certain  definite  capital- 
goods  in  conjunction  with  the  other  factors  of  production  ? 

4.  Does  the  borrower  know  that  these  uses  will  actually  prove 
profitable?  Upon  what,  then,  does  he  base  his  decision  to  demand 
a  certain  amount  of  capital  at  a  given  interest  rate  ? 

5.  In  general,  should  it  be  said  that  the  demand  for  agricultural 
capital  in  the  United  States  has  been  strong?  Why?  What  effect 
has  this  tended  to  have  upon  interest  rates  ? 

6.  Is  the  tendency  for  the  demand  for  capital  in  agriculture  to 
increase  or  decrease  in  recent  years  ?     Why  ? 

7.  If  some  forms  of  capital-goods  are  more  effectual  in  increasing 
the  productivity  of  agricultural  labor,  which  are  the  ones  which  deter- 
mine the  farmer's  demand  for  capital  ? 

8.  Are  our  general  principles  of  diminishing  utility  and  marginal 
uses  applicable  here  ?  May  changes  in  technique  bring  about  sudden 
readjustments  of  our  demand  for  capital  and  of  the  wants  which  fall 
along  the  margin  ?     Give  several  recent  illustrations. 

9.  Does  the  principle  of  substitution  enter  into  the  determination 
of  the  farmer's  demand  for  capital  ?     How  ? 

10.  When  we  speak  of  marginal  demand  for  capital,  do  we  admit 
that  there  are  other  less  pressing  demands  for  capital  which  are  pre- 
cluded from  any  active  part  in  the  rate-making  process?  What  is 
the  force  that  excludes  these  submarginal  desires  for  capital  and 
locates  the  particular  margin  on  our  demand  schedule  ? 

1 1 .  Is  capital  ever  a  free  good  ?     Why  ? 

12.  Does  capital  have  a  cost  of  production?  What  is  its  cost  of 
production  ? 

13.  Analyze  as  carefully  as  you  can  the  forces  which  make  for  a 
high  cost  of  producing  agricultural  capital;  a  low  cost.  Has  the 
supply  of  agricultural  capital  in  America  been  abundant  and  cheap 
or  scarce  and  high  ?     Why  has  this  been  the  case  ? 

70 


INTEREST  ON  FARM  LOANS  71 

14.  When  we  speak  of  the  supply  of  agricultural  capital,  do  we 
mean  to  imply  that  it  is  supplied  by  the  farming  class?  Is  what 
the  farmers  themselves  accumulate  a  considerable  factor  in  the 
situation  ? 

15.  What  circumstances  tend  to  direct  a  generous  share  of  the 
general  capital  supply  of  society  toward  agricultural  uses  ?  In  gen- 
eral, has  the  farmer  had  ready  access  to  these  outside  sources  of 
supply  ?  Give  several  concrete  cases  to  illustrate,  and  explain  care- 
fully. 

16.  If  some  persons  are  so  wealthy  that  they  are  readily  able  to 
put  aside  something  for  the  capital  fund,  and  some  are  so  frugal  by 
nature  that  they  find  it  relatively  easy  to  save  part  of  their  income, 
and  others  are  so  improvident  or  have  incomes  so  little  above  the 
mere  necessities  of  life  that  saving  is  extremely  difficult,  to  which  of 
these  costs  of  saving  does  the  interest  rate  correspond  ?     Why  ? 

17.  Does  a  high  standard  of  living  tend  to  keep  the  interest  rate 
up  ?     Does  a  high  cost  of  living  ?     How  ? 

18.  Do  you  think  that  the  development  of  industrial  insurance 
systems  has  any  effect  on  the  interest  rate?  keeping  savings  banks 
open  all  night  in  industrial  centers  ?  baby  bonds  ?  postal  savings  ? 
Explain  each. 

19.  Show  what  besides  the  market  price  of  capital-use  is  often 
included  in  the  gross  or  contract  rate  of  interest.  Are  these  factors 
in  the  case  of  farm  loans  so  important  as  to  justify  a  large  spread 
between  gross  and  net  interest  rates  ? 

20.  Are  there  wholesale  and  retail  rates  of  interest  ?  middleman 
charges  ?     Are  these  high  or  low  ? 

21.  Can  farmers  bring  about  a  lowering  of  these  items  in  their 
cost  of  borrowing?  How?  Does  the  competition  of  lenders  tend 
to  reduce  them  ?  Do  you  think  the  competition  between  the  federal 
farm  loan  banks  and  other  lenders  will  hasten  this  process  ? 

22.  Explain  the  advantages  of  the  Torrens  system  of  land  transfer; 
the  difficulties  in  the  way  of  its  general  adoption.  What  is  the  present 
status  of  the  question  in  your  state  ? 

23.  How  do  rates  actually  paid  by  farmers  for  loans  in  different 
parts  of  the  United  States  vary  ?  Are  these  gross  or  net  rates  ?  Can 
you  point  out  where  rates  are  high  because  of  extraordinary  risk  ? 

24.  Show  where  and  why  middleman  charges  are  high;  low. 

25.  If  it  were  possible  to  strip  the  gross  loan  rate  down  to  the 
actual  supply-and-demand  price  of  capital-use,  should  we  still  find 
different  rates  of  payment  ?     Why  ? 

26.  Are  there  zones  (similar  to  the  " markets"  for  commodities) 
more  or  less  disconnected  from  one  another  and  having  rates  peculiar 
to  themselves  ? 


72  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

27.  Does  this  mean  that  conditions  of  demand  within  one  zone 
differ  from  those  in  another  ?  Show  how  and  why.  Are  there  also 
different  demands  within  the  zone?  If  these  are  equalized  for  the 
whole  of  any  given  market  in  accordance  with  demands  at  the  margin, 
why  are  not  the  different  zones  so  equalized  ? 

28.  Is  there  one  supply  of  capital  for  the  whole  United  States, 
equally  accessible  to  the  borrowers  of  all  zones  or  districts  ?  Is  the 
supply  of  capital  more  mobile  than  that  of  wheat  ?  labor  ?  straw- 
berries ? 

29.  If  financial  institutions  were  so  changed  as  to  make  capital 
extremely  mobile,  would  that  tend  to  equalize  the  supply  in  all 
markets  and  bring  interest  rates  to  a  parity  ?  How  ?  Do  you  know 
of  any  movement  which  contemplates  doing  this  ? 

30.  Is  there  a  seasonal  fluctuation  in  the  demand-and -supply 
situation  of  agricultural  capital  which  causes  variation  in  interest 
rates?  Is  there  a  similar  fluctuation  in  industrial  demands  for  capi- 
tal ?  Is  it  conceivable  that  a  very  highly  developed  banking  system 
would  offset  these  seasonal  and  sectional  variations  in  such  a  way  as 
to  equalize  demand  and  supply  and  stabilize  interest  rates  ?  Can  you 
point  out  how  this  is  being  done  today  ? 

31.  How  do  you  account  for  the  rapid  increase  in  the  number  of 
small  banks  in  farming  communities,  particularly  in  the  Middle  West, 
in  recent  years  ?  What  effect  do  you  think  they  have  had  on  the 
farmer's  method  of  conducting  his  business?  Have  they  had  any 
effect  on  his  interest  rates  ? 

32.  Do  you  believe  that  the  reduction  of  the  minimum  capital 
required  of  national  banks  from  $50,000  to  $25,000  has  had  any  bear- 
ing on  the  situation  ?  What  is  the  minimum  capitalization  of  banks 
organized  under  your  state  laws  ? 

7,7,.  Can  you  give  any  reason  to  show  that  the  bank  might  be 
justified  in  charging  the  farmer  a  higher  rate  of  interest  on  his  short- 
time  loan  than  it  charges  the  merchant  or  manufacturer  for  similar 
accommodations  ? 

34.  In  general  how  do  the  rates  of  interest  upon  short-time  loans 
compare  with  those  upon  long-time  loans  ?    Why  ? 

35.  What  is  a  usury  law  and  why  are  such  laws  passed?  Are 
they  ordinarily  effective?    Why?    May  they  be  made  so?    How? 

36.  Is  a  more  effective  line  of  attack  upon  high  interest  rates  to 
be  found  in  the  elimination  of  all  unnecessary  demands  upon  the  loan 
fund  ?  in  the  facilitating  of  capital  accumulation  ?  in  the  directing  of 
capital  toward  regions  now  relatively  undersupplied  ?  What  forms 
of  legislation  might  have  such  aims  in  view  ? 


INTEREST  ON  FARM  LOANS  73 

PROBLEMS 

i.  "The  most  common  complaint  is  to  the  effect  that  farmers  have 
been  discriminated  against  in  the  rates  of  interest  they  have  been 
obliged  to  pay.  While  the  railroads  have  been  borrowing  at  from 
4  to  6  per  cent  and  the  industrials  at  from  5  to  7  per  cent,  the  farmer 
has  been  paying  on  the  average  around  8  per  cent."  Can  you  explain 
these  differences  in  rates  ?  Why  should  the  capitalist  single  out  the 
farmer  for  discriminatory  treatment  ? 

2.  "  Distance  from  financial  centers  is  a  factor  affecting  interest 
rates.  Data  show  that  the  average  cost  of  loans  rises  as  one  proceeds 
outward  from  the  leading  financial  centers.  It  is  believed  that  such 
variations  can  be  considerably  lessened,  but  the  remedy  appears  to  lie 
in  institutional  rather  than  individual  effort.' '     What  does  this  mean  ? 

3.  "The  interest  rate  is  approximately  50  per  cent  higher  in  the 
newly  settled  part  of  the  state  than  in  the  older  part.  In  other  words, 
the  fluidity  of  capital  is  so  poor  as  to  require  an  inducement  repre- 
sented by  a  50  per  cent  increase  in  advantage  of  movement  in  order 
that  it  may  flow  to  the  pioneer  sections  of  the  state."  Does  this 
appear  to  be  a  typical  situation  ?  Suppose  the  whole  country  were 
thus  divided  into  two  great  sections  with  rates  of  6  and  9  per  cent, 
respectively,  and  our  credit  institutions  were  so  improved  as  to  secure 
a  complete  fluidity  of  capital.  Would  the  interest  rate  fall  to  a  uni- 
form 6  per  cent  ?    Explain  carefully. 

4.  It  appears  that  in  the  foregoing  case  the  farmers  of  the  older 
section  "are  using  local  money,  and  this  money  is  almost  all  obtained 
from  private,  mostly  small,  lenders,"  whereas  the  money  in  the  newer 
sections  is  much  of  it  procured  through  a  trust  company  in  a  distant 
city.  Are  the  rates  mentioned,  therefore,  strictly  comparable  as  inter- 
est upon  capital  ?  Should  such  facts  be  taken  into  account  in  making 
comparative  statements  of  rates  upon  loans  ? 

5.  "In  many  parts  of  the  country  the  farmer  is  charged  extortion- 
ate and  inexcusable  rates  of  interest,  regardless  of  usury  laws  and  a 
decent  regard  for  human  necessities."  When  is  an  interest  rate 
"inexcusable"  ?  Is  this  question  akin  to  the  problem  of  just  or  fair 
prices  ?  Can  it  be  answered  absolutely  or  only  relatively  ?  Is  there 
such  a  thing  as  a  "normal"  rate  of  interest? 

6.  It  is  asserted  that  now  for  the  first  time  in  our  history  the  West 
is  able  to  finance  its  own  crop  movement.  How  does  this  come 
about  ?     What  does  it  mean  in  terms  of  the  interest  problem  ? 

7.  "Farmers  want  their  personal  loans  to  run  longer  than  other 
bank  patrons,  as  a  rule.  While  this  means  a  smaller  amount  of 
negotiation  by  the  bankers  to  place  their  money,  it  often  means 
that  they  must  pass  by  other  patrons  whose  more  rapidly  moving 


74  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

businesses  would  enable  them  to  pay  higher  rates  on  loans  running  for 
shorter  periods.  Likewise,  the  farmers  usually  repay  their  loans  at  a 
time  of  the  year  when  bankers  must  handle  low-rate  commercial  paper, 
if  anything  at  all,  to  occupy  their  funds  until  the  new  demand  arises 
from  the  farmers/ '  Can  you  illustrate  these  statements  from  the 
experience  of  your  own  community  ?  What  effect  do  they  have  on 
the  willingness  of  bankers  to  supply  capital  to  the  farmer  and  upon 
the  rate  of  interest  charged  ? 

8.  "Rural  credits  and  capital  are  scarce  only  when  borrowers  are 
wasteful,  shiftless,  or  untrustworthy,  or  when  soil  or  climatic  condi- 
tions are  such  as  to  render  the  loaning  of  money  unsafe.  Within  my 
own  recollection,  mortgages  bearing  10  and  12  per  cent  have  been  in 
force  on  Michigan  farm  lands — upon  farms  which  now  command  a 
mortgage  rate  of  5  per  cent.  What  has  brought  about  this  result  ? 
Nothing  more  than  the  increased  productivity  of  the  soil  due  to  more 
efficient  farming  methods.  And  when  the  farms  of  our  western 
states,  where  rates  are  now  exessive,  are  brought  to  this  advanced 
state  of  cultivation  and  productivity,  a  similar  decrease  in  rates  will 
naturally  follow.  In  states  where  high  rates  now  prevail  the  high 
rate  merely  compensates  for  the  risk."  Is  this  reasoning  sound? 
Analyze  carefully. 

ADDITIONAL  REFERENCES 

Besides  general  economic  texts,  such  as  those  of  Marshall,  Taussig,  Selig- 
man,  Ely,  and  others,  the  student  might  consult  any  of  the  special 
works  on  distribution,  notably:  Carver,  The  Distribution  of  Wealth; 
Clark,  The  Distribution  of  Wealth. 

One  particular  point  of  view  is  expounded  in  great  detail  in:  Fisher,  The 
Rate  of  Interest. 

An  excellent  eclectic  discussion  may  be  found  in:  Cassell,  The  Nature  and 
Necessity  of  Interest. 

For  interest  rates  of  American  farmers,  consult:  " Costs  and  Sources  of 
Farm-Mortgage  Loans  in  the  United  States,"  Bulletin  J84,  U.S.  De- 
partment of  Agriculture;  "Factors  Affecting  Interest  Rates  and  Other 
Charges  on  Short-Time  Farm  Loans,"  Bulletin  409,  U.S.  Department 
of  Agriculture.    (See  also  references  at  end  of  next  chapter.) 

TOPICS   FOR   SPECIAL  PAPERS 

Mobility  of  Capital  as  a  Factor  in  Interest  Rates. 

The  Farmer's  Access  to  Non-agricultural  Capital. 

The  Demand  for  Capital  as  Affected  by  Changing  Farm  Technique. 

Middleman's  Charges  as  an  Element  in  the  Cost  of  Loans. 

High  Interest  Rates  as  a  Sign  of  Progress. 

Low  Cost  of  Capital-Use  v.  Low  Rates  of  Interest. 


XIV.     RURAL  CREDITS 

QUESTIONS 

i.  Is  the  rural-credit  problem  something  which  has  come  upon  us 
suddenly  in  the  last  few  years  ?  Is  the  present  agitation  something 
in  the  nature  of  a  reappearance  of  a  difficulty  which  had  been  acute 
in  the  past,  become  quiescent,  and  then  again  broken  out  ? 

2.  What  was  the  time  of  the  earlier  manifestation  of  this  problem  ? 
What  were  the  circumstances  which  caused  it  to  command  public 
attention  at  that  time  ? 

3.  Was  the  real  trouble  at  that  time  too  great  difficulty  in  securing 
loans  upon  farm  mortgages  ?  too  lavish  and  easy  extensions  of  credit 
on  western  farms  ?  Is  it  possible  that  there  were  several  somewhat 
inconsistent  phases  of  the  matter  ? 

4.  What  was  the  nature  of  the  remedies  advocated  at  that  time  ? 

5.  Can  you  discern  any  significant  change  in  the  general  outlook 
revealed  in  present-day  discussions  of  the  problem  ? 

6.  What  did  the  Census  report  of  1890  show  as  to  the  purpose  for 
which  incumbrances  were  incurred  ?  Point  out  several  of  the  signifi- 
cant local  or  sectional  peculiarities. 

7.  Were  the  loans  in  the  main  for  nominally  productive  uses? 
Were  these  expenditures  the  most  productive  employment  to  which 
capital  could  be  put  in  the  United  States  at  that  time  ?    Explain. 

8.  In  what  sense  could  loans  made  for  the  purpose  of  securing 
better  dwellings,  water  supply,  and  the  like,  be  said  to  be  productive  ? 

9.  Might  it  be  said  that  every  effort  of  the  farmer  to  make  the 
agricultural  industry  more  productive  tended  to  increase  its  capitaliza- 
tion and  to  enlarge  by  so  much  the  rural  credit  problem  ?  FrOm  this 
point  of  view  were  we  better  off  before  we  had  a  rural  credit  problem 
or  after  ?  Would  it  be  good  policy  to  check  the  growth  of  agricul- 
tural capitalization? 

10.  Did  the  farmer  who  increased  productivity  profit  by  the 
increase  ?     Did  society  ?     Did  any  individuals  lose  ?     Who,  and  how  ? 

1 1 .  What  institutions  for  supplying  the  farmer  with  capital  grew 
up  in  the  latter  part  of  the  nineteenth  century  ?  Explain  their  method 
of  operation. 

12.  Point  out  the  beneficial  character  of  their  work.  Indicate  any 
abuses  which  were  allowed  to  creep  in  or  harmful  effects  of  their 
operations. 

13.  Was  the  borrower  the  only  one  to  suffer  from  the  unscrupulous 
mortgage  company?  Can  you  draw  a  line  between  the  evils  of  the 
system  and  the  sins  of  those  who  conducted  its  operations  ? 

75 


76  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

14.  Have  some  of  the  old  mortgage  companies  survived  down  to 
the  present  time  ?  Why  ?  Are  they  doing  the  same  kind  of  business 
today  ? 

15.  Do  they  buy  mortgages  with  their  own  funds  and  sell  them 
to  their  clients  as  opportunity  offers  or  do  they  merely  negotiate  a 
transaction  between  two  other  parties — borrower  and  lender  ? 

16.  Do  they  issue  debentures?     Explain  the  debenture  system. 

17.  What  are  the  points  which  a  mortgage  company  emphasizes 
in  recommending  a  particular  mortgage  to  prospective  purchasers? 
Show  the  relation  of  these  features  to  the  desirability  of  the  loan. 

18.  How  does  it  come  that  life  insurance  companies  have  such 
large  sums  to  invest  in  farm  mortgages?  Are  there  any  special 
features  about  the  cost  of  production  of  this  capital  ? 

19.  Is  the  percentage  of  such  funds  which  is  invested  in  farm 
mortgages  growing  or  falling  off  ?  Why  ?  Can  you  explain  why  their 
lendings  are  very  large  in  some  sections  of  the  country  and  relatively 
small  in  others  ? 

20.  How  liberal  is  the  life  insurance  company  in  the  size  of  loan 
it  will  place  on  a  given  farm?  Does  this  meet  the  farmer's  needs 
fully  ?    How  can  it  be  supplemented  ? 

2 1 .  How  about  the  rates  of  interest  and  other  charges  on  insurance- 
company  mortgages  ? 

22.  Explain  the  method  followed  by  the  insurance  company  in 
making  loans.  Is  it  entirely  separate  from  all  other  rural-credit  insti- 
tutions or  does  it  overlap  and  work  through  the  others  ?    Explain. 

23.  From  the  investor's  point  of  view  how  does  the  drainage- 
district  bond  differ  from  the  ordinary  mortgage  ?  from  the  debenture 
of  a  farm-mortgage  company  ?  from  the  mortgage  he  buys  from  his 
bank? 

24.  How  does  it  differ  from  the  farmer's  point  of  view  ?  Is  it  a 
desirable  way  of  securing  capital  on  a  credit  basis  ? 

25.  How  does  it  come  that  the  implement  companies  are  in  the 
lending  business?  Are  they  extending  or  withdrawing  from  these 
activities?  Are  their  terms  liberal  or  otherwise?  Is  it  their  own 
capital  ?  If  not,  whose  is  it,  and  why  could  not  the  farmer  borrow 
it  direct? 

26.  How  did  the  southern  store-credit  system  come  into  being? 
Is  it  necessary?  Is  it  economical?  In  order  to  get  away  from  it, 
what  line  must  be  followed  ?     In  what  does  its  strength  consist  ? 

27.  Explain  the  "  cattle  bank."  Do  commercial  bankers  also  lend 
direct  upon  "  cattle  paper  "  ?  Is  there  any  reason  for  the  continuance 
of  the  cattle  bank  as  a  separate  institution  ? 

28.  Why  do  the  farm  mortgage  bankers  claim  that  there  is  need 
to  continue  to  avail  ourselves  of  their  specialized  services  ?    What  do 


RURAL  CREDITS  77 

they  regard  as  their  part  under  a  scheme  of  rural  credit  legislation  ? 
Has  this  been  realized  under  the  Federal  Farm  Loan  act  ? 

29.  Show  how  bankers  may  organize  the  handling  of  cotton  under 
the  system  of  commercial  banking  already  developed  for  other  lines 
of  business. 

30.  The  cotton  crop  has  been  financed  largely  through  banks  in 
the  past  also,  has  it  not  ?  In  whose  hands  ?  Wherein  does  the  differ- 
ence in  the  present  system  consist  ? 

31.  Explain  the  nature  and  purpose  of  a  rate  sheet.  See  how  it 
compares  with  its  parent,  the  " borrower's  statement"  of  the  regular 
commercial  banking  world. 

32.  What  provisions  of  the  Federal  Reserve  act  were  designed  to 
extend  the  credit  facilities  of  the  farmer  ?  Which  of  these  is  the  most 
important  ?     Why  ? 

33.  What  is  the  meaning  of  " commodity"  paper?  How  is  it 
employed  ?     Has  its  use  benefited  the  farmer  ? 

34.  Have  there  been  any  proposals  to  change  those  provisions  of 
the  Federal  Reserve  act  which  related  to  rural  credit  ?  What  changes 
have  been  made  ?     Can  you  give  the  reasons  for  these  changes  ? 

35.  Give  a  brief  account  of  the  Landschaft  banks  of  Germany.  Is 
there  any  other  type  of  rural-credit  institution  in  Germany  ? 

36.  Look  up  the  Credit  Foncier  (Herrick).  What  changes  would 
be  necessary  to  remodel  our  mortgage  companies  into  such  an  insti- 
tution ? 

37.  Do  you  believe  that  our  rural-credit  problem  is  to  be  solved 
through  a  resort  to  co-operative  agencies  ?  Is  the  federal  farm-loan 
system  co-operative  in  character  ? 

38.  Can  you  see  any  reason  why  co-operative  action  should  have 
a  larger  place  in  the  supplying  of  short-time  credit  than  of  long-time 
credit,  or  the  reverse  ? 

39.  What  are  the  principal  difficulties  in  the  way  of  co-operative 
credit  ?  Is  it  certain  that  what  has  been  done  in  Europe  can  be  done 
here  ?     that  it  should  be  done  here  ?     Give  particulars. 

40.  Are  European  institutions  for  rural  credit  given  financial  aid 
by  the  government  ?  What  reasons  can  you  advance  why  our  govern- 
ment should  do  so  ? 

41.  Are  there  valid  reasons  why  it  should  not  ?     Does  it  do  so  ? 

42.  What  is  a  " credit  union"  and  how  does  it  facilitate  credit 
extension  ? 

43.  Is  the  lending  of  some  particular  state  fund  upon  moderate 
terms  by  preference  to  home-owning  farmers  a  form  of  state  aid  ?  Is 
it  a  desirable  practice  ? 

44.  Would  it  be  desirable  for  each  of  the  states  to  establish  a  rural- 
credit  institution  after  the  pattern  of  the  Missouri  Land  Bank? 


78  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

Would  it  be  desirable  for  each  state  to  have  one  built  upon  some  other 
pattern  ?     Give  your  reasons  carefully. 

45.  Do  you  see  a  field  for  state  activity  in  extending  the  facilities 
for  short-time  loans  ?  by  making  loans  itself  or  by  creating  favorable 
conditions  for  the  making  of  loans  by  regular  credit  agencies  ?     Why  ? 

46.  Explain  the  organization  of  the  federal  land  banks;  the 
national  farm-loan  associations;  joint-stock  land  banks.  Show  the 
relationship  and  proportion  of  government  aid,  co-operative  action, 
and  private  enterprise  in  the  system. 

47.  Is  it  likely  that  existing  mortgage  companies  will  transform 
themselves  into  joint-stock  land  banks?  Why?  How  many  new 
joint-stock  land  banks  have  sprung  into  existence  ? 

48.  Does  it  appear  that  existing  farm-mortgage  companies  will  be 
put  out  of  existence  by  the  coming  of  the  farm-loan  system  ?     Why  ? 

49.  Does  the  new  system  give  the  farmer  an  opportunity  to  reduce 
the  actual  expense  of  making  a  loan  to  the  minimum  ?  How  ?  Does 
the  longer  time  for  which  mortgages  may  be  made  operate  to  reduce 
costs  ? 

50.  Does  the  system  put  the  farmer  in  touch  with  cheaper  sources 
of  capital  ?  How  ?  Does  the  government  guaranty  have  any  bearing 
on  this  question  ?     How  about  tax  exemption  ? 

51.  Explain  the  method  of  issuing  and  selling  bonds.  Will  the 
land  banks  sell  these  bonds  direct  to  the  public  ?  Is  there  any  other 
method  of  sale  ? 

52.  Explain  the  meaning  of  " amortization "  and  the  method  used 
in  the  federal  farm-loan  system. 

PROBLEMS 

1.  "Our  federal  reserve  system  will  undoubtedly  serve  as  an 
important  step  in  connecting  farmers  with  outside  capital,  especially 
because  of  the  opportunity  afforded  for  the  discounting  of  agricultural 
paper.  At  the  same  time,  it  is  clear  from  the  study  of  present  sources 
of  short-time  loans  to  farmers  that  there  is  a  large  portion  of  our 
farming  population  that  is  not  in  a  position  at  present  to  take  advan- 
tage of  the  federal  system."  Explain  both  these  propositions  and 
show  how  the  difficulty  is  to  be  met. 

2.  "The  business  ability  and  business  habits  of  the  farmer  are 
tested  when  the  banker  asks  for  a  statement  of  the  borrower's  busi- 
ness. If  he  is  in  the  habit  of  keeping  accounts  and  can  explain  the 
nature  of  his  resources  and  liabilities  and  thus  indicate  accurately  his 
financial  standing,  the  wisdom  of  granting  the  desired  loan  as  well  as 
the  proper  terms  thereon  can  readily  be  determined.  If  this  informa- 
tion be  lacking,  the  banker  is  in  doubt  about  the  safety  of  the  loan, 
he  is  likely  to  charge  up  his  uncertainty  to  the  borrower's  account  in 


RURAL  CREDITS  79 

the  form  of  a  higher  rate  of  interest."  Is  it  also  possible  that  he  may 
refuse  a  loan  that  really  is  worthy  ?  What  lesson  does  this  carry  for 
the  farmer  who  is  angry  at  being  asked  for  a  statement  and  to  the 
one  who  has  no  records  or  accounts  ?  Is  it  easier  for  the  big  bank  or 
the  little  one  to  get  borrowers'  statements  ?     Why  ? 

3.  "The  investigations  made  show  the  need  for  personal  credit  to 
be  more  acute  than  for  land  credit.  It  is  easy  to  get  land  credit  equal 
to  50  per  cent  of  the  land  value,  but  the  temptation  is  great  for  the 
farmer  to  tie  nearly  his  entire  wealth  in  land,  leaving  himself  little  or 
nothing  for  operating  capital.  Being  heavily  in  debt  on  his  land 
cripples  his  personal  credit,  but  he  is  usually  worthy  of  personal 
credit."  If  the  farmer  has  an  equity  in  his  land  of  50  per  cent  or  some 
considerable  fraction  of  its  value,  would  he  be  more  or  less  eligible 
for  personal  credit  than  the  man  who  has  no  property  ?     Is  commer- 

'  cial  or  short-time  credit  supposed  to  be  secured  in  the  enterprise  for 
which  the  loan  is  made  or  to  lean  upon  some  outside  security  ?  Is  it 
possible  to  have  this  situation  in  agriculture  or  is  the  nature  of  the 
risk  too  great  ?  greater  than  in  the  case  of  merchants  and  manufac- 
turers ? 

4.  "The  farmer  can  get  credit  for  very  short  periods  of  time,  but 
what  he  needs  is  credit  extending  over  a  period  corresponding  to  the 
length  of  time  required  to  bring  to  fruition  the  project  for  which  the 
loan  is  made.  In  the  case  of  dairy  cows  it  is  perhaps  two  or  three 
years.  For  many  farm  operations  it  is  nine  months  or  a  year,  and 
the  usual  90  or  120  days  at  the  bank  is  too  short."  Do  the  transac- 
tions which  in  other  lines  of  business  are  financed  with  90-day  loans 
actually  liquidate  themselves  within  that  period  ?  How,  then,  is  it 
managed?  Would  the  same  plan  be  equally  applicable  for  the 
farmer  ? 

5.  "One  of  the  basic  defects  of  the  Farm  Loan  act  is  the  fixing 
of  the  maximum  interest  rate  by  statute.  The  law  of  supply  and 
demand  will  control  the  rate  in  any  event,  and  a  fixed  maximum  may 
conceivably  render  the  act  inoperative  in  the  communities  most  in 
need  of  increased  facilities."  Do  you  agree  with  this  writer  ?  Might 
one  logically  agree  with  part  of  the  statement  and  take  exception  to 
part  ? 

6.  "Another  defect  is  to  be  found  in  the  system  of  joint  guaranties, 
putting  good,  bad,  and  indifferent  securities  in  the  same  category, 
penalizing  the  good  for  the  advantage  of  the  inferior."  Is  it  true  that 
securities  are  pooled  ?  What  bad  ones  get  in  ?  Are  the  good  penal- 
ized? 

7.  "While  it  is  undoubtedly  true  that  the  adoption  of  a  land- 
credit  system  providing  for  a  low  rate  of  interest  and  a  longer  term 
of  loans  repayable  by  amortization  would  enable  a  man  of  small  means 


80  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

eventually  to  become  a  landowner,  it  does  not  follow  that  farms  thus 
acquired  would  be  farms  of  profitable  size  or  that  the  percentage  of 
farm  tenancy  would  decline."  Does  the  lowering  of  interest  rates 
effect  an  immediate  improvement  in  the  condition  of  borrowers  on 
land  security  ?  Does  it  produce  an  equal  benefit  to  later  purchasers  of 
land?  Explain.  Does  stimulation  of  effort  to  become  landowners 
seem  likely  to  have  the  effect  of  increasing  small  holdings?  What 
does  farm-management  study  indicate  as  to  the  relative  productivity 
of  such  farms  ? 

8.  "It  is  inevitable  that  lower  rates  for  farm  mortgages  will  result 
in  greatly  enhanced  farm  values.  And  the  lower  rates  being  brought 
about  by  legislative  enactment,  and  not  firmly  based  upon  better 
crops  and  improved  conditions  on  the  farm,  their  value  will  be  arti- 
ficial and  inflated.  And  where  the  man  in  moderate  circumstances 
is  able  now  to  accumulate  enough  money  to  make  the  down  pay- 
ment on  a  contract,  if  land  values  increased  50  per  cent,  or  doubled, 
his  payment  would  not  be  large  enough  to  be  acceptable.  Even 
though  he  were  able  to  purchase,  he  would  have  increased  interest  to 
pay  on  the  inflated  price,  as  well  as  additional  principal. "  Is  this 
a  valid  objection  to  the  federal  farm-loan  system  ?    Explain. 

ADDITIONAL  REFERENCES 

Her  rick  and  Ingalls,  Rural  Credits. 

Morman,  Principles  of  Rural  Credits  (includes  bibliography). 

Moult  on,  Principles  of  Money  and  Banking,  Part  II,  chap.  ix. 

Putnam,  The  Land  Credit  Problem. 

Robins,  The  Farm  Mortgage  Handbook. 

Wolff,  Co-operative  Credit  for  the  United  States. 

Stewart,  An  Analysis  of  Rural  Banking  Conditions  in  Illinois. 

Cameron,  The  Torrens  System. 

Kemmerer,  "  Agricultural  Credit  in  the  United  States,"  American  Economics 

Review,  II,  No.  4. 
The  National  Conference  on  Marketing  and  Farm  Credits,  Report  of  Third 

Annual  Session. 
Hibbard  and  Robotka,  "  Farm  Credit  in  Wisconsin,"  Bulletin  247,  Wisconsin 

Experimental  Station. 
United  States  Investor,  November  11,  19 16. 
Publications  ot  tne  Federal  Farm  Loan  Board. 
Reports  of  the  Federal  Reserve  Board. 
Farmers'  Bulletin  654,  "How  Farmers  May  Improve  Their  Personal  Credit. " 

TOPICS   FOR  SPECIAL  PAPERS 

Causes  of  the  Increase  in  Farm  Mortgages  Prior  to  1890. 
The  Relation  between  Farm  Mortgages  and  Free  Silver. 
The  Populist  Movement. 


RURAL  CREDITS  81 

Present  Status  of  the  Farm  Mortgage  Company  in  the  United  States. 

Land  Mortgage  Institutions  in  the  State  of . 

Personal  Credit  Conditions  in  Your  Home  Community. 
The  Relation  of  Rural  Credits  to  Better  Farming. 
The  Fight  to  End  Store  Credit. 

Efforts  of  Bankers  to  Extend  Their  Business  with  Farmers. 
Achievements  of  the  Federal  Farm  Loan  Act. 

Are  Additional  Institutions  for  Extending  Agricultural  Credit  Needed  ? 
The  Change  from  Dealer's  Book  Credit  to  Bank  Credit  with  the  Federal 
Reserve  System 


XV.    AGRICULTURAL  WAGES 

QUESTIONS 

i.  Is  it  relatively  easier  or  more  difficult  to  isolate  and  identify 
the  share  of  the  total  returns  of  the  industry  which  go  to  labor  in  the 
case  of  agriculture  than  in  the  case  of  a  railroad  company  ?  a  steel 
mill  ?  a  large  mail-order  house  ?  a  corner  grocery  ?    Why  ? 

2.  Is  there  a  tendency  to  have  more  of  the  labor  in  agriculture 
performed  upon  a  wage  basis  today  than  it  was  a  generation  ago? 
Why  ?     Does  this  have  any  bearing  upon  the  problem  ? 

3.  Regarding  wages  as  the  price  paid  for  labor,  what  differences 
does  it  show  as  compared  with  commodity  prices  ? 

4.  State  the  law  of  diminishing  utility  as  applied  to  labor  employed 
in  agriculture.     What  sets  the  margin  at  which  price  is  determined  ? 

5.  Economists  refer  to  demand  which  grows  out  of  the  demand 
for  another  article  as  "  derived  demand."  Is  the  demand  for  labor 
a  case  of  derived  demand  ?    The  primary  demand  is  for  what  ? 

6.  If  labor  demand  is  a  derived  demand,  does  its  intensity  depend 
upon  the  value  or  price  of  the  objects  of  primary  demand  ?  Will  the 
farmer  hire  more  three-dollar-a-day  labor  to  raise  two-dollar  wheat 
than  to  raise  wheat  which  he  expects  will  not  bring  more  than  one 
dollar? 

7.  Does  the  principle  of  substitution  operate  in  determining  the 
demand  for  agricultural  labor  ?    How  ? 

8.  Is  the  marginal  worker  one  of  minimum  efficiency  or  unfavor- 
able situation  ?  What  is  marginal  labor  ?  Are  they  necessarily  found 
in  the  same  person  ?  Are  there  any  reasons  why  they  are  likely  to 
coincide  ? 

9.  Does  the  supply  of  labor  depend  upon  the  number  of  human 
beings  ?  upon  the  number  who  are  available  ?  upon  the  number  who 
are  both  available  and  competent  to  perform  the  particular  task? 
upon  the  number  available  multiplied  by  the  degree  of  their  com- 
petency?   Are  there  any  other  factors? 

10.  Mention  all  the  factors  you  can  which  influence  the  avail- 
ability for  agricultural  work  of  residents  of  the  United  States. 

n.  Mention  all  the  factors  which  have  influenced  their  efficiency 
in  that  work. 

12.  Is  our  agriculture  undersupplied  with  labor  at  the  present 
time  ?    What  does  that  mean  ?    How  could  it  be  remedied  ? 

13.  Certain  persons  in  the  Pacific  states  have  urged  the  suspension 
or  repeal  of  Asiatic  exclusion  laws  and  agreements.  Would  this 
remedy  the  situation  ?    Whv  ?    If  so,  would  it  be  advisable  ?    Why  ? 

82 


AGRICULTURAL  WAGES  83 

14.  Does  the  supply  of  labor  depend  upon  its  cost  of  production  ? 
Explain  carefully.  Should  we  try  here  as  elsewhere  to  lower  our  cost 
of  production  by  every  means  possible  ?    Why  ? 

15.  In  general  has  the  supply  of  labor  in  American  agriculture 
been  scarce  or  abundant?  The  demand  keen  or  slack?  The  price 
high  or  low  ?  Are  you  talking  of  hired  labor  or  self-employed  labor  ? 
Would  your  answer  be  different  in  the  two  cases  ? 

16.  Would  it  be  different  if  you  are  speaking  of  wages  being  high 
or  low  as  compared  with  agricultural  wages  in  other  countries  or  as 
compared  with  wages  in  other  industries  in  America  at  the  same  time  ? 

17.  Can  a  scarcity  price  for  labor  be  readily  corrected  by  drawing 
workers  from  other  employments  or  from  a  region  of  abundance  to 
one  of  scarcity  ?    Explain  both  cases. 

18.  What  noticeable  changes  have  come  about  in  the  last  few 
years  to  alter  the  conditions  of  supply  of  farm  labor?  in  1892-96? 
in  1917? 

19.  Do  you  think  that  the  supply  of  labor  in  dairy  work  tends  to 
be  relatively  more  or  less  scarce  than  that  in  other  lines?  Why? 
That  in  raising  truck  crops  ?    Why  ?    In  "  tractor  farming  "  ?    Why  ? 

20.  Does  the  farmer  have  to  devise  methods  of  farming  which 
will  enable  him  to  offer  high  wages  in  order  to  secure  a  supply  of  farm 
labor  today?    What  "methods  of  farming"  does  this  imply  ? 

21.  Does  he  have  to  offer  attractive  work?  How  can  he  do  so? 
Does  he  have  to  offer  attractive  living  conditions?  permanent 
employment  ? 

22.  May  the  skilful  farmer  so  plan  his  operation  as  to  reduce  his 
need  of  workers  considerably?  Is  this  equivalent  to  an  increase  in 
the  supply  of  labor  ?    Does  it  have  points  of  superiority  ?    What  ? 

23.  Outline  some  of  the  most  important  of  these  ways  of  increas- 
ing the  effective  labor  supply. 

24.  Is  farming  considered  as  desirable  socially  as  other  callings  ? 
more  so?  Are  conditions  undergoing  a  change?  Why?  What 
effect  is  this  likely  to  have  on  the  supply  of  labor  in  agriculture  ? 

25.  Are  country  living  conditions  more  attractive  or  less  attrac- 
tive than  city  conditions  to  the  rank  and  file  of  people  ?  Why  ?  Are 
they  more  or  less  healthful?  Be  very  cautious  until  you  have 
figures. 

26.  What  proportion  of  our  population  must  be  induced  to  follow 
farm  life  under  present  organization  of  agriculture  ?  Are  we  keeping 
up  these  supplies  from  within  or  do  we  have  to  draw  upon  outside 
resources  ? 

27.  Is  it  desirable  to  increase  our  supply  of  farm  labor  through 
immigration  ?  Why  ?  Through  immigration  from  all  sources  ?  Are 
the  reasons  for  your  answer  economic  or  social  ? 


84  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

28.  Do  we  seek  immigrant  labor  (a)  to  make  a  wage  class  in  our 
present  agricultural  industry?  (b)  as  independent  farmers  self- 
employed  and  if  possible  land-owning?  In  the  second  case  is  the 
purpose  to  have  these  farmers  displace  the  present  agricultural  popu- 
lation or  to  develop  new  lands  or  to  reduce  present  areas  of  farms  and 
increase  the  intensity  of  cultivation  ? 

29.  Explain  the  difference  between  nominal  wages  and  real 
wages. 

30.  Has  this  difference  usually  been  adequately  kept  in  mind  in 
presenting  the  data  of  farm  wages  ? 

31.  Does  adding  the  cost  of  country  board  to  the  farm  hand's 
cash  wage  make  it  comparable  with  city  wages  ?    Why  or  why  not  ? 

32.  Should  union  dues  or  temptations  to  fritter  away  money  on 
trifles  be  taken  into  account  in  connection  with  the  city  worker? 
Should  they  be  offset  by  some  factor  such  as  " psychic  income"  ? 

33.  How  about  relative  steadiness  of  employment  and  length  of 
the  working  lifetime  ?    accident  and  occupational  disease  ? 

34.  In  general  what  has  been  the  trend  of  wages  of  hired  farm 
help  ?    How  do  you  explain  regional  differences  ? 

35.  Should  all  these  figures  be  corrected  to  allow  for  changes  in 
general  price  level  ?  Divide  by  the  index  number  of  general  prices. 
What  is  your  conclusion  ? 

36.  How  has  the  labor  return  of  the  self-employed  farmer  been 
moving?  How  about  his  purchasing  power?  How  has  the  war 
affected  this  ? 

37.  How  does  the  remuneration  of  labor  in  agriculture  compare 
with  that  in  other  callings  ?  Which  group  of  other  workers  is  quali- 
tatively best  suited  for  comparison  ? 

38.  Would  you  conclude  that  returns  in  agricultural  and  non- 
agricultural  employments  are  equalized  through  the  process  of  com- 
petition at  the  present  time  or  are  in  a  state  of  flux  ?    Explain. 

PROBLEMS 

1.  The  account  book  of  a  New  Jersey  farmer  of  1850  contains  the 
following  entry:  "Hired  Daniel  McSugh  for  one  year  for  $100. 
Rented  house  to  William  Harris  for  $25  per  year,  and  pay  him  50 
cents  per  day."  Can  you  explain  these  rates  of  wages?  In  1848: 
"Rented  house  to  Perry  Simmons  at  $2  per  month,  and  pay  him 
50  cents  per  day  for  a  year,  not  including  wet  or  bad  weather.  Car- 
penter work  $1 .  25  per  day  and  board."  Does  this  throw  any  further 
light  on  the  situation  ? 

2.  "Until  recent  years,  the  problem  of  farm  labor  in  the  United 
States  was  almost  entirely  confined  to  the  quantity  of  the  supply,  but 


AGRICULTURAL  WAGES  85 

during  the  last  decade  or  two  not  only  the  amount  of  the  supply  rela- 
tively has  almost  critically  declined,  but  the  quality  has  almost 
absolutely  declined,  or  has  failed  in  an  important  degree  to  keep  pace 
with  the  need  for  labor,  more  skill,  and  more  intelligence."  What 
does  this  mean?  That  was  written  in  191 2.  Do  you  think  condi- 
tions are  improving  or  not  ?  Is  cheap  and  abundant  labor  an  abso- 
lute good  ?     How  about  the  farm  labor  in  China  ? 

3.  "The  agricultural  element  in  populations  has  declined,  and 
still  the  people  are  provided  with  food  and  raiment.  Some  of  the 
countries  have  food  and  fiber  to  sell  and  other  countries  need  to  buy; 
but  it  is  logical  that  the  relative  decline  of  the  agricultural  element 
must  eventually  reach  a  point  at  which  it  is  at  equilibrium  with  indus- 
trialism." Do  you  agree  ?  Is  it  likely  that  this  will  be  reached  by  a 
back-to-the-land  movement  or  only  after  still  further  diminishing  of 
the  rural  proportion  ?     Which  condition  do  we  desire  ?     Why  ? 

4.  "If  the  farm  does  not  meet  the  competition  of  other  employ- 
ments, it  must  suffer  the  loss  of  some  of  its  laborers.  The  effect  of 
the  farm  to  meet  the  competition  for  its  labor  is  often  apparent  within 
a  rim  of  country  surrounding  cities  of  considerable  size."  How  do 
you  think  the  effects  of  this  competition  would  be  manifest  ?  Do  you 
think  it  also  possible  that  the  city  would  furnish  a  supply  of  specialized 
or  of  seasonal  laborers  which  would  have  the  effect  of  reducing  labor 
costs  within  this  affected  zone  ?  Does  the  type  of  agriculture  prac- 
ticed in  the  vicinity  of  cities  have  any  bearing  on  the  question  ? 

5.  "The  tendency  among  farm  workers  is  toward  a  demand  for 
average  wages  by  persons  of  inferior  skill  or  defective  reliability,  so 
that  practically  the  difference  in  wage  rate  is  not  so  great  as  in  the 
real  value  of  the  service."  Does  this  mean  that  there  are  conven- 
tional prices  for  labor?  Is  the  tendency  likely  to  be  stronger  or 
weaker  in  case  the  labor  should  become  organized  into  unions  or  other 
associations  ? 

ADDITIONAL  REFERENCES 

Besides  the  standard  texts  in  general  economics,  the  student  might  con- 
sult some  treatise  dealing  especially  with  distribution,  such  as, 

Carver,  Distribution  of  Wealth,  chap.  iv. 

Report  of  the  Industrial  Commission  (1900),  Vols.  X  and  XL 

Carver,  Principles  of  Rural  Economics ,  chap.  v. 

Warren,  Farm  Management,  chap.  xi. 

Funk,  "  Value  to  Farm  Families  of  Food,  Fuel,  and  Use  of  House,"  Bulle- 
tin 410,  U.S.  Department  of  Agriculture. 

Social  and  economic  surveys  of  rural  communities  appearing  from  state 
universities  and  experiment  stations  and  the  United  States  Department 
of  Agriculture, 


86  OUTLINES  OF  AGRICULTURAL  ECONOMICS 


TOPICS  FOR  SPECIAL  PAPERS 

Immigration  and  the  Supply  of  Farm  Labor. 

The  Relation  of  Agricultural  Technique  to  Farm  Wages. 

The  Equivalence  of  Farm  Wages  and  Those  in  Other  Occupations. 

Causes  and  Results  of  High  Wages  to  Farm  Labor. 

Reconciling  High  Farm  Wages  with  Low  Cost  of  Agricultural  Labor. 


XVI.     SOME  PROBLEMS  OF  AGRICULTURAL  LABOR 

QUESTIONS 

i.  Is  the  length  of  the  working  day  on  the  American  farm  such 
as  to  be  a  menace  to  the  health  of  the  workers?  Does  it  entail 
enough  discomfort  to  become  a  factor  in  wages?  Does  it  drive 
workers  away  or  discourage  them  from  coming  into  agricultural 
employment  ? 

2.  What  is  the  length  of  the  working  day  in  your  neighborhood? 
Could  farmers  cut  this  down  by  shrewd  management  ?  Is  there  any 
tendency  to  get  away  from  the  extremely  long  day?  How  is  it 
brought  about  ? 

3.  Is  a  set  working  day  of  ten  or  nine  or  eight  hours  practicable 
in  agriculture  ?  Explain.  Could  the  farm  employ  two  shifts  during 
rush  periods?  What  do  you  know  about  night  work  in  agri- 
culture ? 

4.  Have  living  conditions  for  the  farm  hand  improved  as  fast  as 
the  standard  of  living  has  risen  for  the  typical  American  farm  family  ? 
as  rapidly  as  the  standard  of  living  of  wage  workers  in  cities  has 
risen  ?    Why  ? 

5.  Do  we  have  any  class  of  agricultural  workers  for  whom  living 
conditions  are  relatively  worse  than  anything  known  in  agriculture  in 
the  past  ? 

6.  Does  it  appear  to  be  necessary  to  improve  the  conditions  of 
employment  and  of  living  for  agricultural  workers  today  ?    Why  ? 

7.  Describe  some  of  the  movements  which  seem  to  promise  suc- 
cess in  this  direction. 

8.  Does  intemperance  constitute  a  problem  of  rural  labor  in  your 
community?  Do  you  believe  that  recent  "dry"  legislation  has  les- 
sened the  evil  for  the  country  as  a  whole  ? 

9.  If  farm  hands  resorted  to  drink  because  of  the  "barrenness  of 
farm  life,"  is  the  problem  being  solved  by  removing  its  cause  ?  Is  it 
in  your  experience  a  problem  of  the  resident,  permanent  workers,  or 
of  the  floating,  seasonal  labor  ? 

10.  Explain  the  nature  of  the  accident  hazard  in  farm  work. 
What  proportion  of  this  risk  could  be  eliminated  by  proper  preventive 
measur  es  ?  Are  there  still  considerable  hazards  inherent  in  the  occu- 
pation? Do  they  tend  to  grow  more  or  less  extensive  with  the 
development  of  the  business  ? 

11.  Are  there  any  "occupational  diseases"  connected  with  agri- 
culture? Is  the  general  health  risk  higher  or  lower  than  for  city 
dwellers  ?    What  are  the  possibilities  in  this  direction  ? 

87 


88  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

12.  Do  state  labor  departments  have  jurisdiction  over  agricultural 
labor  ?     Would  more  activity  in  this  direction  be  desirable  ?     Explain. 

13.  Explain  the  advantages  and  shortcomings  of  private  labor 
exchanges  as  a  means  of  distributing  the  farm-labor  supply.  Look 
up  the  work  done  by  public  agencies  in  your  state;  by  the  United 
States  Bureau  of  Immigration.     Is  such  public  activity  extending? 

14.  Describe  the  Japanese  "contract"  system  of  handling  agricul- 
tural labor.  What  are  its  good  points  ?  its  evils  ?  Do  you  know  of 
the  same  system  being  used  by  other  classes  of  workers  ? 

15.  Could  Italian,  Greek,  and  similar  labor  groups  be  utilized 
without  the  intervention  of  the  padrone?  Are  there  abuses  in  the 
system  as  now  operated  ?  Could  they  be  removed  by  requiring  all 
padrones  to  be  supervised  by  state  agents  in  a  manner  similar  to  that 
used  by  some  states  with  private  employment  agencies  ? 

16.  Is  women's  labor  in  this  country  increasing  or  decreasing? 
Is  there  a  proper  and  wholesome  field  for  women's  labor  in  farm 
work  ?  for  labor  other  than  that  of  the  women  and  girls  of  the  farm 
family  ? 

17.  Is  there  harmful  use  of  the  labor  of  (a)  American  women, 
(b)  immigrant  women,  (c)  negro  women,  in  agriculture  today  on  a 
large  scale? 

18.  If  so,  could  our  labor  laws  be  so  framed  as  to  reduce  the  evil  ? 
as  entirely  to  eliminate  it  ?    Why  ? 

19.  Is  there  a  type  of  child  labor  in  agriculture  which  is  normal 
and  beneficial?  Some  which  is  improper  and  harmful?  Give  par- 
ticulars. 

20.  Describe  the  child-labor  conditions  in  your  own  section  and 
what  action  if  any  is  taken  to  safeguard  the  child. 

21.  Explain  the  worst  instance  of  child  labor  with  which  you  are 
acquainted  and  outline  the  measures  which  would  be  necessary  to 
cope  with  cases  of  this  sort. 

22.  Show  the  relation  of  the  question  of  child  labor  to  the  educa- 
tional system.  What  effect  does  this  have  upon  the  future  labor 
supply  ? 

23.  Are  there  any  distinctly  agricultural  workers'  unions  in  the 
United  States  today  ?  Are  agricultural  workers  being  absorbed  into 
other  general  labor  organizations  ?     What  ones  ? 

24.  What  is  the  general  labor  philosophy  and  policy  of  the  organi- 
zations which  are  getting  a  foothold  among  rural  workers  ?  Is  it  a 
correct  and  wholesome  effort  to  improve  the  condition  of  the  worker 
through  proper  and  feasible  means  ? 

25.  Does  labor  organization  take  hold  on  regular  or  itinerant 
workers  in  agriculture  ?  To  what  extent  has  it  appeared  in  your 
section  ? 


SOME  PROBLEMS  OF  AGRICULTURAL  LABOR  89 

26.  Does  the  history  of  older  agricultural  regions  seem  to  indicate 
that  labor  organization  is  bound  to  come  eventually  ?    Why  ? 

PROBLEMS 

1.  "Recently  the  wages  of  orange-pickers  were  raised  to  $2  . 25  per 
day.  They  now  demand  $2  .  50.  I.W.W.  leaders  seem  to  be  respon- 
sible for  the  agitation.  Mexicans,  Japanese,  Filipinos,  I.W.W. ,  ask 
for  the  same  wages,  regardless  of  the  number  of  boxes  picked  per  day." 
This  applies  to  conditions  of  March,  19 17.  Explain  the  economic 
issues  involved.  The  dispatch  continues:  " Unless  new  labor  can  be 
secured  from  other  points,  no  doubt  total  shipments  will  be  affected 
to  a  considerable  extent."     Trace  the  results  in  that  case. 

2.  It  was  expected  that  employers  would  fight  the  advance 
demanded  in  the  foregoing  case.  What  will  determine  the  outcome 
of  such  a  struggle?  "I  know  of  farmers  who  shut  down  operations 
this  year  because  they  could  not  break  even,  whose  men  were  riotous 
and  saucy  for  fifty  dollars  a  month;  whose  same  men  came  back  crying 
for  their  old  jobs  at  thirty  dollars  after  the  farmer  had  been  compelled 
to  sell  out.  When  unskilled  farm  labor  exceeds  fifty  dollars  a  month, 
I  defy  you  to  break  even — I  don't  care  what  you  are  raising:  apples, 
potatoes,  wheat,  barley,  corn,  or  milk."  Does  this  shed  any  light 
on  the  problem  ? 

3.  "The  farmers'  wives  do  their  share  of  the  work.  In  26  per 
cent  of  the  families  the  women  work  in  the  fields  during  the  rush 
seasons;  in  two- thirds  of  the  families  they  help  milk  and  do  the  chores." 
Is  this  "their  share  of  the  work"?  Is  the  question  one  of  morals, 
economics,  social  standards,  health,  or  what  ? 

4.  "Even  the  'desirable'  immigrant  from  Northern  and  Western 
Europe  who  brings  with  him  on  an  average  $55  can  at  best  only  ob- 
tain employment  as  a  farm  hand,  which  depends  primarily  on  the 
demand  for  farm  labor,  and  here  he  is  confronted  by  the  fact  that  the 
American  farmer  cannot  even  keep  his  own  sons  on  the  farm."  Does 
this  indicate  that  the  farm-labor  market  is  over-supplied  ?    Explain. 

5.  "There  is  not  the  intense  competition  for  place  among  men  in 
the  country  that  there  is  in  the  city.  In  the  industrial  and  com- 
mercial world  positions  are  graded  so  that  there  is  always  a  more 
desirable  one  just  ahead.  There  is  no  place  where  one  can  stop  to 
take  a  breath  without  fear  that  someone  will  step  in  ahead  of  him. 
But  the  farmer  may  become  old-fashioned  and  yet  make  a  good  liv- 
ing. He  has  very  little  need  to  fear  that  someone  else  can  crowd  him 
out  if  he  does  not  want  to  go."  Is  this  true  ?  Is  it  a  desirable  or  an 
undesirable  condition  ?  It  was  written  as  a  partial  explanation  of 
the  lower  death-rate  in  the  country,  Would  this  have  any  bearing 
on  your  answer  ? 


go  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

ADDITIONAL  REFERENCES 

For  additional  references,  see  preceding  chapter. 

TOPICS   FOR  SPECIAL  PAPERS 

A  Plan  for  Shortening  the  Labor  Day  through  Better  Management. 

The  Proper  Restrictions  upon  Child  Labor  in  Agriculture. 

How  to  Reduce  Farm  Work  Accidents. 

Harmful  Results  of  Women's  Field  Work  and  How  to  Check  It. 

Living  Conditions  of  Farm  Laborers  in ■  County  (or  other  district). 

Improving  the  Distribution  of  Seasonal  Labor  in  Agriculture. 


XVII.    PROFITS  IN  AGRICULTURE 

QUESTIONS 

i.  Distinguish  "pure"  profits  from  other  expressions  in  which  the 
term  is  used  more  loosely. 

2.  What  is  meant  by  speaking  of  profits  as  the  "residual"  share 
in  the  distributive  process  ? 

3.  Does  the  ordinary  farmer  think  of  a  distinction  between  his 
labor  return  and  something  to  be  labeled  " profits "?  Why  not? 
Would  it  make  his  farm  operations  more  intelligent  if  he  did  ? 

4.  When  extraordinary  returns  upon  a  farm  enterprise  are  secured, 
to  what  does  the  farmer  ascribe  the  excess  ?  Is  he  correct  in  doing 
so?    Why? 

5.  Is  the  amount  of  profits  determined  on  the  principle  of  price? 
If  so,  what  are  the  supply  and  demand  factors  involved  ? 

6.  Do  pure  profits  accrue  only  to  the  owner  (or  controller)  of 
capital  ?    Explain  carefully. 

7.  Have  farmers  secured  a  special  return — profits — as  a  result  of 
the  European  war  ?  Is  this  a  chance  profit  ?  Has  it  had  any  element 
of  foresight?  If  so,  is  it  still  profits?  Is  there  any  element  of 
monopoly  gain? 

8.  Is  agriculture  ordinarily  a  field  for  the  creation  of  profits  ?  of 
monopoly  profits?  Why?  Is  it  possible  to  have  some  element  of 
monopoly  gain  in  farming  ?  other  than  ownership  of  scarce  natural 
agents  ?    of  unusual  labor  abilities  ? 

9.  Would  it  mean  anything  to  say  that  profits  are  derived  from 
business  enterprise  solely  and  not  from  technical 'operations  as  such? 
What  is  meant  by  enterprise  or  entrepreneurship  ? 

10.  Does  business  enterprise  always  entail  risk  ?  Are  losses,  then, 
a  part  of  the  general  phenomenon  of  profits?  May  we  call  them 
negative  profits  ? 

1 1 .  Are  the  risks  which  attach  to  agriculture  the  sort  which  give 
rise  to  profits  ?     Explain. 

12.  Are  farmers  as  a  class  inclined  to  be  venturesome  in 
their  business  operations?  Be  extremely  discriminating  in  your 
answer. 

13.  Does  the  willingness  to  assume  risks  benefit  the  one  who  does 
so  ?     Temporarily  or  permanently  ? 

14.  Does  it  benefit  the  public  ?     Temporarily  or  permanently  ? 

15.  Can  you  show  any  relationship  between  profits  and  progress  ? 

16.  Does  the  evidence  seem  to  show  that  American  agriculture 
keeps  close  to  a  no-profit  basis  ?    If  so,  would  this  be  a  reason  for 

91 


92  OUTLINES  OF  AGRICULTURAL  ECONOMICS 

congratulation  of  ourselves  as  a  nation  ?    Why  ?    A  cause  of  anxiety  ? 
Why? 

17.  Does  it  appear  that  profits  appear  more  often  or  in  larger 
volume  in  industrial  or  mercantile  enterprises  than  in  agriculture? 
Is  this  because  of  the  nature  of  the  business  or  because  of  the  kind  of 
persons  who  are  engaged  in  it?  Does  the  character  of  the  people 
reflect  the  character  of  the  business  ? 

18.  Do  you  see  any  reason  to  suppose  that  changes  are  coming  in 
the  organization  of  the  farm  business  which  are  likely  to  alter  its 
profit-rendering  possibilities  ? 

19.  Are  the  possibilities  of  securing  profits  from  a  business  limited 
in  accordance  with  the  opportunities  of  introducing  new  efficiencies 
of  organization  ? 

20.  Are  these  in  turn  limited  by  the  existence  of  a  machine  tech- 
nique ?  Is  machine  equipment  taking  a  more  important  place  in  ag- 
ricultural industry  today  ? 

PROBLEMS 

i.  "On  the  average,  the  farmers  who  hired  the  most  help  made 
the  largest  labor  incomes.  Those  who  directed  less  than  $150  worth 
made  no  more  than  hired  men's  wages.  The  average  labor  income  of 
those  who  directed  over  $800  worth  of  labor  was  $1,1 94."  What  does 
"labor  income"  mean  in  the  vocabulary  of  the  farm-management 
survey  ?  Do  you  find  an  element  of  profits  added  to  the  wages  of  the 
farmer  in  the  cases  cited  here  ? 

2.  "The  gleaning  of  profits  consists  simply  in  utilizing  natural 
resources,  the  labor  of  other  men,  or  units  of  capital  with  a  higher  net 
productivity  than  others  can.  Such  superior  directive  ability  is 
possessed  in  differing  degrees  by  different  men,  and,  also,  the  ability 
to  get  hold  of  these  other  productive  agents  depends  upon  various 
factors  many  of  which  are  institutional  in  their  nature,  such  as  heredi- 
tary distribution  of  wealth."  Does  the  farmer's  profit  depend  upon 
his  ability  to  utilize  much  capital,  many  men,  and  extensive  acreage 
(or  highly  productive  land)  up  to  the  maximum  productivity  or  at 
least  a  better  than  average  performance  ?  Does  it  depend  upon  his 
financial  ability  to  get  control  of  these  things  ?  If  he  has  the  ability, 
can  he  get  the  use  of  other  persons'  property  ? 

3.  "In  this  war  crisis  the  farmers  have  shown  themselves  just  as 
unscrupulous  in  taking  advantage  of  the  extremity  of  others  as  a 
means  of  securing  fat  profits  for  themselves  as  any  coal  baron  or 
trust  magnate  ever  was."  Are  some  profits  legitimate  and  others 
not  ?    If  so,  where  is  the  line  to  be  drawn  ? 


PROFITS  IN  AGRICULTURE  93 

TOPICS  FOR  SPECIAL  PAPERS 

Profits  Which  Grow  Out  of  the  Lowering  of  the  Cost  of  Production  of  Farm 

Products. 
Personal  Qualities  Related  to  Profits. 

Institutional  Factors  in  the  Obtaining  of  Profits  in  Farming. 
The  Emergence  and  Elimination  of  Profits. 
Landowner  v.  Worker  as  Claimant  to  Profits. 


SYLLABUS 

It  was  explained  in  the  preface  to  Agricultural  Economics  that  "  the 
decision  to  use  the  fourfold  division  into  consumption,  production, 
exchange,  and  distribution  grew  out  of  a  desire  to  make  the  book  most 
serviceable  to  present  users,  rather  than  out  of  any  personal  devotion 
to  conservative  ideals  in  the  matter  of  economic  exposition.''  For 
such  teachers  as  might  desire  to  follow  another  order  of  presentation, 
I  have  here  sketched  an  outline  syllabus  of  a  course  organized  upon 
a  different  and,  I  believe,  a  better  plan. 

I  strongly  feel  that  it  is  worth  while  to  begin  with  chapter  i  (even  in 
those  courses  in  which  only  a  short  time  is  available)  in  order  that 
the  student  may  get  his  problem  in  its  larger  setting  before  going  on 
to  the  study  of  its  details.  Of  course  much  is  glossed  over  in  this 
first  survey  because  nearly  all  of  the  remainder  of  the  subject  is  implicit 
in  the  general  statements  of  this  introductory  chapter. 

After  the  idea  has  been  made  clear  that  the  farmer  as  economist 
is  seeking  to  learn  how  to  administer  his  affairs  in  a  world  organized 
on  a  basis  of  price,  it  is  well  to  go  at  once  to  a  study  of  the  general 
principles  of  value  and  price.  These  are  next  applied  to  the  cost-goods 
with  which  the  farmer  must  deal — land,  labor,  and  capital.  This 
leads  into  a  discussion  of  the  work  of  the  organizer,  first  in  the  field 
of  production,  and  secondly  in  the  marketing  of  his  product.  This 
view  of  the  marketing  process  readily  dissolves  into  the  picture  of  the 
distributive  process  as  the  outcome  of  a  system  of  bargaining  for  the 
services  of  persons  or  of  productive  goods. 

Finally  the  distribution  of  the  proceeds  of  the  industry  into  private 
incomes  gives  us  the  condition  which  determines  the  possibilities  of 
consumption,  and  this,  explained  in  terms  of  its  effects  upon  the  health, 
numbers,  and  economic  motivation  of  society,  completes  our  circle 
of  thought  by  taking  us  back  into  the  market-place  where  the 
farmer  sells  his  products  and  bargains  for  control  of  the  agents  of 
production. 

While  references  are  made  by  chapter  and  selection,  the  instruc- 
tor will  no  doubt  find  that  some  readings  will  need  to  be  broken  up  and 
others  quite  possibly  used  in  more  than  one  connection.  Where  it  is 
desired  to  shorten  the  course  to  the  length  of  one  semester,  it  will 
probably  be  found  best  to  drop  chapters  vii,  ix,  x,  and  xiv,  or  the 
larger  part  of  them.  Chapter  i  can  be  treated  summarily  and  chap- 
ter iii  should  not  need  very  lengthy  discussion  with  agricultural 
students. 

94 


SYLLABUS  95 

I.  Introduction — the  Character  of  the  Problem: 

Agricultural  economics  the  problem  of  administering  price- relationships 
in  the  farming  business  (including  its  domestic  aspects),  chap.  i. 

II.  The  Nature  of  the  Price-Making  Process: 

a)  Meaning  of  supply  and  demand  (chap,  viii,  A). 

b)  Nature  of  the  market  (chap,  viii,  B). 

c)  Function  of  the  market  (chap,  viii,  D). 

III.  The  Factors  of  Production: 

a)  Services  of  land  and  their  value,  chaps,  iii  and  xi,  A. 

b)  Services  of  human  beings  and  their  value,  chaps,  iv  and  xiii,  A. 

c)  Services  of  capital-goods  and  their  value,  chaps,  v  and  xiv,  A. 

IV.  How  the  Costs  of  Production  Are  Determined: 

a)  Entrepreneurship,  chap.  vi. 

b)  Managership,  chap.  vi. 

c)  The  services  of  accounts,  chap.  vii. 

V.  How  Prices  of  the  Product  Are  Determined: 

a)  Markets  for  farm  products,  chaps,  viii,  C,  D,  and  F,  and  ii,  B. 

b)  Methods  of  selling,  chap.  ix. 

c)  Marketing  facilities,  chap.  x. 

d)  Control  and  regulation,  chaps,  viii,  E,  and  ix,  F. 

VI.  Distributing  the  Income  from  Agriculture: 

a)  The  landlord,  chaps,  xi  and  xii. 

b)  The  capitalist,  chaps,  xiii  and  xiv. 

c)  The  worker,  chaps,  xv  and  xvi. 

d)  The  question  of  a  surplus,  chap.  xvii. 

VII.  Consumption  as  a  Part  of  the  Economic  Cycle  (chap,  ii) : 

a)  The  farmer's  standard  of  living: 
i)  Present  consumption. 

2)  Canons  of  economic  consumption. 

3)  The  difficulties  in  the  way  of  a  satisfactory  condition  I    , 

b)  Consumption  standards  of  the  non-agricultural  population  and 

their  effects  upon  farming: 

1)  Nature  of  popular  demand. 

2)  Effects  on  agriculture. 

3)  Means  of  altering  public  attitude. 

PRINTED  IN  THE  U.S.A. 


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